Green Deal loans reviewed: The Green Deal explained What is the Green Deal?
The Green Deal is a new way to pay for energy-saving home improvements. You'll be able to take out Green Deal finance to pay for measures such as loft, cavity or solid wall insulation, double glazing, a new boiler or even a 'micro-generation' system such as solar panels.
Video: how does the Green Deal work?
The Green Deal process has four steps: assessment, finance, installation and repayment. Find out more about them in our animation below.
How does the Green Deal differ from a normal bank loan?
The way the deal differs from a standard loan is that the repayments you'll make on the loan will (in theory at least) be covered by the savings on your energy bill you make from having the energy-saving home improvements installed. This system is known as the 'Golden Rule' - you should not pay back more in loan repayments than you are saving on your energy bill.
But the Golden Rule is not a guarantee, just a guideline based on energy-saving estimates. So most of any savings you make could be taken up by repayments during the term of the Green Deal and you'll only get all of the savings once you've paid back the cost of installing the energy efficient measures. And because the Golden Rule is not guaranteed, it's also possible that repayments could be more than your savings while your plan is in place - meaning you would have to find extra cash to fund the difference.
The Green Deal is not like a traditional personal loan, because it is attached to your property rather than you as an individual. This means it will pass on to the next owner of your house if you move.
We explain how the Green Deal works in more depth, below - or you can go straight to the home improvements covered by the scheme. The Green Deal is a complex product so make sure you research it well.
How do I get started?
If you're interested in a Green Deal loan you will first need to arrange a visit from an assessor accredited with the Green Deal Quality Mark. All companies involved in the Green Deal must bear this mark and comply with a code of practice.
Green Deal providers include energy companies, shops and companies that install energy efficient technology. The provider will offer you a quote for a Green Deal plan. You could be expected to pay around £100 for an assessment.
See our Green Deal jargon buster for an explanation of all the Green Deal terms above.
How is it different?
In the past, insulation has been available free or heavily discounted through schemes funded through everyone’s energy bills. The most recent free insulation scheme (Cert) finished in December 2012 but some energy companies still have offers: check our round up of the top free and cheap insulation deals to track down the best.
There is nothing quite like it elsewhere. The range of available interest rates is not fully clear. However, the Green Deal Finance Company has published a list of example rates, on which the APR ranges from 7.9% to 10.8%. Over a long period of time this rate of interest will add a significant amount to the cost of the products you buy.
Is the Green Deal worth it?
When the terms of the loans are known, Which? will be looking at how they compare with other ways of borrowing, such as paying by credit card or adding to your mortgage. As with any financial product, whether the Green Deal is a good deal will depend upon your personal and financial circumstances.
Green Deal plans may have different interest rates and different terms and conditions. We advise consumers to read the terms carefully and consider all the implications when signing up to this long-term financial commitment. We support the aim of energy efficiency but we will judge the Green Deal like any other product and do so independently
When will the Green Deal be available?
Qualified assessors have been able to offer assessments since 1 October 2012 ahead of the 'official' Green Deal launch which was 28 January 2013. Although this launch date has now passed, no Green Deal Plan Providers have as yet made the details of their finance and loan packages public.
When this does happen, Which? will be providing comparisons of the interests rates, costs and potential early repayment charges of Green Deal loans in our Green Deal loans review.
Will it affect house prices?
Technically the Green Deal is a charge attached to the electricity meter of your house, not to you as an individual, so if you move house the Green Deal stays with the house.
It is not known how the Green Deal will affect the property market but there is a concern that some prospective buyers may not be attracted to a property with a substantial Green Deal charge attached to it.