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What is a green loan and where can I get one?

Mozo Experts Choice Awards 2024 Personal Loans. Solar panel roofing purchased with the help of a personal loan.

With sustainability at the top of mind for many Australians, getting a green loan can be a way to make costly lifestyle changes without blowing the bank. 

“As we live in a world where concerns about climate change and sustainability are only growing, it makes sense that Australian consumers are looking to do their part, whether that’s through environmentally friendly domestic upgrades or choosing an electric vehicle,” says Mozo Banking Expert Peter Marshall.

Green loans often offer competitive rates in order to make sustainable choices more accessible. This can be helpful because options like solar panels and electric vehicles can often be more expensive to purchase initially than conventional alternatives.

As more and more people look to make these changes in their personal lives, with Australia aiming to reach net-zero emissions by 2050, more providers are offering green loans. Marshall says: “Lenders are responding to this trend by offering green loan products, a handful of which come with some of the lowest interest rates available on the Mozo database.”

When we compare the average rates on green loans to those on other loans, we can see proof that green loans generally offer lower interest rates. At the time of writing, the current average rate for an unsecured personal loan in the Mozo database is 10.50% p.a.* across variable and fixed rate loans, compared to the average rate of an unsecured green loan in the Mozo database, which is 6.62% p.a.* for variable rate loans and 6.93% p.a.* for 3-year fixed-rate loans.

With the cost of energy soaring and provider numbers dropping - find the figures in our latest energy report - going green can lead to longer-term savings as well as being better for the environment. The Electric Vehicle Council estimates that an electric vehicle is $10 cheaper per kilometre than a petrol or diesel car of comparable size.

What is a green loan?

Green loans work pretty much the same as any other personal loan

You choose how much you need to borrow and over what time period and pay that back gradually, along with any fees and interest accrued on the loan. Of course, there’s a little bit more to it than that.

Green loans can only be used for purposes approved by the lender, which will be specified in the loan agreement. Green loans are also offered in the same ways as other personal loans - they can be secured or unsecured, long-term or short-term, and have variable interest rates or fixed interest rates. You can learn more about those on their associated pages.

For a quick breakdown of these categories, remember the following:

  • Fixed interest rates: Your interest rate stays the same for the life of your loan, making it easier to budget. This is an attractive option if you're worried about a rate hike down the track in a rocky financial climate, but they do tend to be attached to higher interest rates and more rigid conditions.
  • Variable interest rates: These rates are subject to change throughout the course of the loan. Rates are generally lower and have more flexible features (like early repayments and redraws), but the interest rates can rise over time.
  • Unsecured loan: An unsecured loan isn’t held against any other asset - it’s cash borrowed, depending on your credit score and the lender's risk assessment. These loans tend to have higher interest rates but also don’t put your property at risk.
  • Secured loan: Secured loans generally have lower interest rates but use an asset as collateral. This means that your car, property, or other valuable possessions get put up against the loan and could potentially be repossessed by the lender if you default on the loan.

As green loans have specific limitations, they do tend to be secured. This means that if you default on your repayments, your electric car or solar panels could be seized to make up for any losses. So be sure you get those payments made!

What can I use a green loan for?

Generally speaking, there are two kinds of green loans. There are green car loans for use on hybrid and electric vehicles and green renovation loans, for use adding sustainable upgrades to homes.

Some common things green loans are used for include:

  • Solar panel installation
  • Sustainable heating or cooling systems
  • Double glazing
  • Electric vehicle charging
  • Water tanks
  • Energy-efficient appliances
  • Insulation

Some providers also offer even more specific loans, like the Police Credit Union Solar Eco Loan (which can only be used to purchase solar power products). The vast majority are less restricted, but make sure you read up on the loan details before committing.

What's the difference between a personal loan and a green loan?

Apart from the obvious - that a green loan is for specific use on renewable energy or sustainable products - there are a few key differences.

When you take out a personal loan, unless specified in the terms of the loan agreement (as is the case with a green loan or some kinds of medical loans and most car loans), you can generally use the funds on whatever you want. That means everything from holiday loans to debt consolidation loans and home renovation loans.

With a green loan, you will most likely need to retain evidence of your purchase. In most cases, you’ll have pretty clear physical evidence - the car in your garage or the solar panels on your roof. 

Another key factor in making green loans different from personal loans is that they most often have significantly lower interest rates. This is to make sustainable energy more attractive and more affordable.

What is a green car loan?

Green car loans are designed specifically to let you purchase greener vehicles. These can be especially finicky with regards to the type of car allowed, as it may have to fall into a specific category. These are some terms to familiarise yourself with, which may be included or excluded from a specific loan:

  • Battery electric vehicles (BEVs): BEVs operate on battery alone, which means they need to be plugged in to charge. Generally, when referring to electric vehicles (or EVs), this is the type of car people have in mind.
  • Hybrid electric vehicles (HEVs): Hybrid electric vehicles run on both electricity and petrol or diesel. The combustion engine charges the electric battery so that these don’t need to be recharged.
  • Plug-in hybrid vehicles (PHEVs): These cars are hybrids that run on a combination of petrol and electric, and as the name suggests, they incorporate plug-in charging and, if not charged, will default to petrol.
  • Low emissions vehicles: This is a broad term that can include the above vehicles as well as newer makes of petrol and diesel cars designed to economise fuel consumption, which may be considered by certain green car loans.

Ensure that the car you’re interested in qualifies for the green car loan you’re looking at, or you could be setting yourself up for a nasty shock.

What features should I look for in a green loan?

There’s a huge range of green loans available. As you will be paying this loan off over a considerable term, you want to ensure the features you settle on work for what you need. Here are some features you might want to watch for in a green loan.

  • Fees: Almost all green loans have fees attached. You will almost always find an application fee for a loan, but there can also be fees for late payments, early payments, redraws, and more.
  • Loan term: The shorter the loan length, the less interest you’ll pay, but the more your repayments will likely be.
  • Comparison rate: A comparison rate factors in the interest rate and the fees you’ll be charged with a specific loan. Often, comparing home renovation loans based on the comparison rate (rather than the advertised rate) gives you a more accurate idea of the full cost of the loan.
  • Extras: Additional perks like free extra repayments or a flexible repayment schedule can give you the opportunity to pay off your loan earlier and save on interest.

What about green home loans?

As more people look to bring green energy through their homes and even into building new homes, a growing number of green home loans are available. 

These are not just designed to finance the installation of sustainable energy or renovation of a home to be more green, but rather to finance the purchase of a home altogether. 

Many of the features you’ll use green loans for are the same things that make a home eligible for a green home loan. Be sure to check out our guide to green home loans.

Am I eligible for a green loan?

Two main things will determine your eligibility for green loans: your creditworthiness and your intent. Along with your income, savings, and employment status – these are all looked to by lenders to determine eligibility for a green loan.

Your credit score:

First, let’s look at your credit score and history. Your lender will perform a credit check, as they’ll want to minimise their risk of loaning money and not getting it back. 

This will tell them how good you are at paying back debt and whether or not you have a good track record with making repayments on previous loans and lines of credit. To better your chances of being approved for a loan and to get the best interest rate possible, you’ll want to do what you can to improve your credit score.

Why you want the loan:

Your lender will also be curious about what you want to do with the money. If you haven’t got adequate plans for solar panel installation but have just booked an expensive vacation, there might be some questions raised.

Where can I get a green loan?

With so many people looking to switch things up, lots of providers have jumped on the green loans train. In fact, nearly every lender now offers a green loan option, including online lenders and peer-to-peer providers.

Even the big 4 banks have covered ground with eco loans, with Commonwealth Bank offering green options for both car and renovation loans. 

In fact, in total, there are more than 15 providers in the Mozo database who offer green loans. Some offer both green loans generally as well as specific green car loans. 

Keep reading to find some editor’s picks of green loans to watch.

Noteworthy green loans

We’ve highlighted a few loans you might want to take a look at, as well as listing off a few more green loans on the market at the moment.

Green car loans

Bendigo Bank - Green Personal Loan (Secured)
  • Fixed rates from 5.49% p.a. (5.84% p.a. comparison rate*)
  • Flexible repayment options
  • Low application and ongoing fees
Find out more

Looking to buy an electric vehicle or hybrid car? Well, as an award-winner^ in the 2024 Mozo Experts Choice Award, Bendigo Bank’s Green Personal Loan could be one to think about. This secured loan lets you borrow upwards of $2,000 to purchase an eligible vehicle and has flexible repayment options, meaning borrowers can make payments on a weekly, fortnightly or monthly basis. Fixed rates start from 5.49% p.a. (5.84% p.a. comparison rate*), with a loan term of 1 to 7 years. Just bear in mind that there is an application fee of $250, and a late payment fee of $35, so it’s important to make your repayments on time to avoid this penalty.

RACQ - Green Car Loan
  • Fixed rates from 5.99% p.a. (5.99% p.a. comparison rate*)
  • No monthly fees
  • Maximum loan amount of $150,000
Find out more

Helping you go electric, the RACQ Green Car Loan is a ^2024 Mozo Experts Choice Award winner in the green personal loan category, boasting competitive fixed rates from 5.99% p.a. (5.99% p.a. comparison rate*) on eligible vehicles. Borrow between $3,000 to $150,000 for a maximum term of 5 years and enjoy no monthly fees. You also have the flexibility to choose when you make repayments - whether it be on a weekly, fortnightly or monthly basis. The option to make unlimited additional repayments is also included and taking advantage of this feature could mean finalising your loan sooner. But do keep in mind that there is no redraw facility on this car loan, and there’s a $195 application fee and $20 late payment fee to budget for. 

Green personal loans

Gateway Bank - Eco Personal Loan
  • Variable interest rate starts at 5.75% p.a. (6.76% p.a. comparison rate*)
  • Ability to make free extra repayments
  • Redraw facility
Find out more

Including solar with your home reno? Interest rates start at 5.75% p.a. (6.76% p.a. comparison rate*) for the award-winning^ Eco Personal Loan from lender Gateway Bank. Borrow a minimum of $3,000 up to a maximum of $30,000 to pay for your eligible green upgrades while enjoying the use of a redraw facility when you make a minimum redraw amount of $250. This unsecured loan is also available for a term between 1 to 5 years and has no late payment or service fees. However, there is an application fee of $149 that you’ll want to watch for.  

Police Credit Union - Solar Eco Loan
  • Variable rates start from 6.24% p.a. (6.24% p.a. comparison rate*)
  • Ability to make free extra repayments
  • No application or annual fees
Find out more

Need some funding to make sustainable upgrades in your home? If so, then you may want to check out Police Credit Union’s Solar Eco Loan. As a winner in the ^2024 Mozo Experts Choice Awards under the green personal loan category, this competitive offer has variable rates starting from 6.24% p.a. (6.24% p.a. comparison rate*) and no service or exit fees. This unsecured loan also lets you make repayments on a weekly, fortnightly, or monthly basis to suit your schedule. Plus, there’s also the option to make free extra repayments for when you have some extra cash. Remember though, this loan is only available for the purchase of solar energy products.  

Queensland Country Bank - Green Reno Loan
  • Variable rates from 6.49% p.a. (6.49% p.a. comparison rate*)
  • Ability to make free extra repayments
  • Redraw facility
Find out more

If you’re after a green loan to make home renovations, Queensland Country Bank’s award-winning^ Green Reno Loan might be a good one to consider. It has a variable starting rate of 6.49% p.a. (6.49% p.a. comparison rate*) and includes features such as the ability to make free extra repayments along with access to a redraw facility. Eligible borrowers may take out a loan between $3,000 up to $50,000, with a minimum loan term of 1 year and a maximum of 10 years. As there is a late payment fee of $40, it’s important to ensure your repayments are made on time to avoid being hit with this fee. 

You might also want to check out our Mozo Experts Choice Awards for Personal Loans to see which other loans stood out, including green loans.

Below, we’ve listed some of the other green loans on the market - though keep an eye on our Personal Loans news hub, because more are being added all the time!

You might also want to check out our Mozo Experts Choice Awards for Personal Loans to see which other loans stood out, including green loans. Below, we’ve listed some of the other green loans on the market - though keep an eye on our Personal Loans news hub, because more are being added all the time!

Green Car Loans

Green loans

  • Bank First - Green Personal Loan

If you’re interested in keeping your finances sustainable, be sure to swing by our green finance hub. To see more standout loans, take a look at our best personal loans.

*These rates for a new unsecured personal loan of $10,000 are correct as at 16/11/2023, but may be subject to change following this date. 

Compare other loans - last updated 2 March 2024

Search promoted personal loans below or do a full Mozo database search. Advertiser disclosure
  • Mozo Expert Choice Badge
    Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    6.75% p.a.to 26.95% p.a.
    6.75% p.a.to 26.95% p.a.based on $30,000
    over 5 years

    Borrow up to $50,000 unsecured. Perfect if you earn more than $22,100 p.a. and have good to excellent credit. Multi-year winner of Mozo’s Experts Choice Unsecured Personal Loan Award, 2021, 2022, 2023 & 2024^'

    Repayment terms from 2 years to 7 years. Representative example: a 5 year $30,000 loan at 6.75% would cost $35,430.23 including fees.

    Compare
    Details
  • Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    5.76% p.a.to 24.03% p.a.
    6.55% p.a.to 24.98% p.a.based on $30,000
    over 5 years

    Fast, easy and 100% online, this is a low cost loan with no ongoing fees or extra repayment penalties. It's perfect for savvy borrowers with great credit. If you’re over 18 and earn above $30,000, you could qualify (other eligibility criteria may apply).

    Repayment terms from 3 years to 7 years. Representative example: a 5 year $30,000 loan at 5.76% would cost $35,173.52 including fees.

    Compare
    Details
  • Express Personal Loan

    Secured

    interest rate
    comparison rate
    Monthly repayment
    14.95% p.a.to 27.95% p.a.
    29.30% p.a.to 42.8% p.a.based on $10,000
    over 3 years

    Access fast finance on loans from $5,000 to $25,000 with a Jacaranda Finance Personal Loan. Terms from 24-48 months. Check if you qualify with no impact on your credit score. Enjoy a speedy, online approval.

    Repayment terms from 2 years to 4 years. Representative example: a 3 year $10,000 loan at 14.95% would cost $14,324.71 including fees.

    Compare
    Details

* WARNING: The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

^See information about the Mozo Experts Choice Personal Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

Rhianna Dews
Rhianna Dews
RG146
Senior Money Writer

Rhianna, RG146 certified in Generic Knowledge and Deposit Products, has helped Aussies with finances for a decade. She's written for TechRadar, Simple Living Australia, and worked with Foxtel and Vodafone.

Sara Borman
Sara Borman
Money writer

Sara has a Communications degree and has contributed to academic and literary publications in the US and Australia. She aims to bring an accessible point of view to credit cards and loans for Mozo readers.