Best green loans

Written by: Kat Tretina

•3 min read

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If you’re researching how to finance home energy efficiency improvements, green loans may allow you to spread costs over several years.

You may also get a lower interest rate with a green-specific loan than you’d get with a traditional personal loan. Here are our picks for the five best green loans available nationwide.

What you should know about green loans

Improving your home’s energy efficiency may help you use up to 20% to 30% less water or energy and increase your energy savings, but there are some considerations to remember.

Tax credits

There may be tax credits offered in a given tax year as incentives for energy-efficient improvements, but these may only offset a portion of your cost.

If you qualify for a credit, it may reduce how much you owe in federal income taxes — but you’ll need to consult the current tax year’s rules (published by the IRS) to learn what’s possible.

Alternatives to green loans

You may also want to consider a home equity loan, home equity line of credit (HELOC) or cash-out refinance loan to finance green projects. But take note: There’s risk in secured-borrowing options – because you use your property as collateral, you could lose your home if you default.

Interest rates and terms vary

Depending on the lender, you could borrow up to $100,000 and have up to 20 years to repay a loan. Before applying, keep the following things in mind:

Credit checks: When you apply for any personal loan, including green loans, lenders will check your credit. When the lender conducts a hard credit inquiry, it can affect your credit scores.
Interest rates may be high: The lowest rates typically go to people with excellent credit. If your credit isn’t great, your interest rate may be much higher. Many lenders offer interest rates in the double digits.
Not all lenders offer long loan terms: While some lenders offer repayment terms up to 20 years, not all lenders have those options. With some, the longest term is just five years, which would mean a higher monthly payment.
Origination fees: Make sure you read the fine print. Some lenders charge origination fees that can be as high as 12% of your loan amount.

As with any debt, make sure you carefully weigh the pros and cons of green loans before making a decision.

How we picked these loans

To identify the best green loan lenders, we looked at major banks, credit unions and online lenders that work with borrowers nationwide. We evaluated 20 lenders based on their available personal loan options, loan amounts, terms, interest rates, typical disbursement times and borrower criteria to select these lenders.

*Approval Odds are not a guarantee of approval. Credit Karma determines Approval Odds by comparing your credit profile to other Credit Karma members who were approved for the personal loan, or whether you meet certain criteria determined by the lender. Of course, there’s no such thing as a sure thing, but knowing your Approval Odds may help you narrow down your choices. For example, you may not be approved because you don’t meet the lender’s “ability to pay standard” after they verify your income and employment; or, you already have the maximum number of accounts with that specific lender.