A green loan is a type of personal loan meant specifically for projects intended to boost energy efficiency in your home, which can ultimately provide cost savings. These are typically larger scale projects that require significant investment for the cost-conscious and environmentally aware homeowner. While you may not need a green loan to install a low-flow toilet, put up a clothes line or build a rain garden, major undertakings such as solar installations, geothermal heat pumps or triple-pane windows require a larger upfront investment.
A green loan may well be worth it in the long run when you consider savings on monthly bills, tax credits and sustainability. They’re typically offered by banks, peer-to-peer lenders and other specialty lenders focused solely on environmental loans. As with all loans, you should be very careful to make sure you’re working with a credible lender that provides excellent customer support.
How can I use a green loan?
Major renovations If you are doing major remodeling to multiple rooms, you could have a prime opportunity to make your home eco-friendly from top to bottom. Big renovations could include these green projects:
- New window designs to increase natural light
- Added insulation, including for walls, floors and ceilings
- ENERGY STAR certified HVAC systems
Solar panels A green loan could make a lot of sense if you are installing solar panels. More than two million U.S. homes have solar panels, according to a solar energy industry report, a sharp increase from just three years. While the cost of installation can be in the neighborhood of $30,000 for the average home in the U.S., the tradeoff is you’re taking control of your energy supply, eventually saving money. 
Your savings could vary widely depending on where you live, but some estimates suggest anywhere between $10,000 and $70,000 over a 25-year period. Solar energy systems may also be eligible for a federal tax credit.
Water saving systems Water costs the average household more than $1,000 per year, but it’s possible to save more than $380 annually by updating their home’s water-saving technology, according to WaterSense, a partnership program with the U.S. Environmental Protection Agency. The following technologies could make your home more water-efficient:
- Rain sensors
- Irrigation controllers
- Soil moisture sensors
- Micro-irrigation
Geothermal units These are essentially pumps that use ground temperature to heat/cool your house or provide hot water. The costs are usually at least double a traditional heating/cooling system, but they save energy over the course of five to ten years. The U.S. Department of Energy reports that there are roughly 50,000 geothermal heat pumps installed every year. The costs can range from $10,000-$25,000, but the savings can be as much as $1,500 per year. The goal for many people is to save enough over time to outweigh the initial costs.
Energy-efficient appliances Some homeowners may want to round out an eco-friendly home with energy-efficient appliances such as the washer and dryer, refrigerator, freezer and dishwasher. These usually come with an ENERGY STAR certification. Depending on how you use the appliances, you could save hundreds of dollars per year. New appliances could also increase the value of your home.
What are the terms of a green loan?
The terms of a green loan will vary by lender. When comparing the terms of different green loans, be sure to compare whether providers charge origination fees, closing costs or prepayment penalties. Those additional costs can add up quickly if you’re not careful, and not every lender provides those benefits.
Discover Personal Loans offers flexible repayment terms and charges no fees of any kind as long as you pay on time. You can even use our Discover Personal Loans calculator, you can choose the loan length that works best for you.
Keep in mind that if you pay the loan off in a shorter amount of time, the monthly payments will be higher, but the total interest paid will be less. If you pay it off over a longer period of time, you’ll have lower monthly payments but a higher total interest amount.
How much can I save with a green loan?
It’s difficult to put an exact number on just how much you save in the long run by making your home eco-friendly. But the U.S. Green Building Council (USGBC) gives us a number of statistics that suggest how significant your savings could become. According to the USGBC:
- The average household spends $2,150 per year on energy bills, so consider how much you could lower costs with a significant reduction in energy use.
- More than half of consumers rank energy-efficient properties as a top requirement when purchasing a home.
- There is evidence that homes with sustainable features are selling at higher prices than conventional homes, and the upfront costs may be able to be recouped relatively quickly.
The overall advantages
There are many advantages to creating a green home environment — you’re creating a more comfortable place to live and cutting down on your carbon footprint, as well as hopefully putting money back in your pocket as the years go by.
Find out if you qualify for a Discover personal loan for your green remodeling project.Check Your Rate