Funding for Energy Efficiency and Renewable Energy Projects
Note that the information contained on this page is only to inform you about the various finance options on offer. It should not be considered 'financial advice' and we recommend you seek the services of an independent financial adviser before making any decisions, particularly where large sums are involved. The advice of a good independent financial adviser it could potentially save you from financial ruin (see the paragraph at the bottom of this page for more on this).
There are a variety of sources of funds on offer when it comes to financing your energy efficiency or renewable energy project. Government grants, private grants, homeowner loans, personal loans, savings, credit cards and bank account overdrafts are the main ports of call. If you are going to borrow money, make sure you are aware of the Annual Percentage Rate (APR) of interest that will be charged, and if you will be penalised for paying the balance off early.
Government and Private Grants
You may want to make government grants your first port of call. Many grant schemes offer up to 50% of the total cost, up to a certain amount, and you will never have to pay it back. The grants that are available vary from country to country. In the United Kingdom, the Energy Saving Trust offer a range of grants from central government, energy companies and local authorities. For small or medium sized businesses, the Carbon Trust offer interest free loans for such projects. For renewable energy projects, the Low Carbon Buildings Programme is well worth a look.
Using your savings is the cheapest way to pay for your project. It is also one of the fastest ways to get funding (as you already have the money!). However, it is often wise to keep at least part of your savings for emergencies. Your bank may also require prior notice before withdrawing from a savings account.
If you are making improvements to your home, whether those improvements are for energy saving measures such as cavity wall insulation, or renewable energy systems such as solar panels or a wind turbine, the improvements you make will ultimately increase the value of your property. It makes sense, therefore, to look into re-mortgaging or taking out a homeowner loan. These loans are secured on the value of your property and therefore can attract the same rate of interest as your current mortgage (especially if you re-mortgage). Be cautious, as some homeowner loans can attract very high rates of interest. However, they can be an option if you have a poor credit history.
Personal loans are often unsecured and usually attract a higher rate of interest than re-mortgaging, but it can still be worth it if you are able to repay the debt relatively quickly. Remember that your energy saving or renewable energy project is an investment, and you should balance the financial benefits against the interest you will have to pay.
Credit cards can offer surprisingly inexpensive funds, especially if you pay the cost of the project with some other method and then do a balance transfer to a low-interest or zero-interest credit card (if you do this, make sure the card has no existing debt and do not use the card for spending as the interest can work out very high). Some credit card companies offer credit card cheques, which you can use to pay for all or part of your project if your supplier does not accept credit cards as a form of payment. Again, these can attract higher levels of interest, so be cautious.
Bank Account Overdrafts
Your bank may be able offer you an overdraft facility for your project. This often works out more expensive than taking out a loan or borrowing on a credit card, but if you can repay the debt quickly, it is a further option to consider.
Get Independent, Professional Advice and Read the Small Print
As stated in the first paragraph, you should always seek independent financial advice if you feel you need help. A bank, building society or credit card company will usually only give advice on their own products, so a independent financial adviser, recommended to you by someone whom you trust, and who has had experience with the adviser in question, will be a very worthwhile find.
Always read the small print (slowly and carefully!) and don't be afraid to ask for clarification if you do not fully understand the details.