Home Improvement Loans Explained
When sprucing up our homes, we can also implement tactical home...
The organisation was set up to offer householders a chance to apply for home improvements while paying for them through their energy bills.
These were originally offered though the Government, but are now being funded by private investors.
The GDFC was founded with the aim of helping people make their homes more energy efficient and reducing energy bills in the long run.
Homeowners can take out loans to pay for energy efficient measures that are then paid back through their energy bills over a set period of time.
Back in 2013, the Green Deal was set up by Government to allow consumers to afford energy efficient home improvements by paying back through gas and electric bills.
However, due to low take up, it was shut two years ago but has recently relaunched. Under the new scheme, which is currently being soft launched, there are six green deal providers (GDPs) offering the loans and installation and this number is set to increase by the full launch at the beginning of October.
Boilers will be the main focus of the campaign, but details on insulation, ground source heat pumps and air source heat pumps will be also made available.
While no details have yet emerged on the difference between the government-backed project and the private investor-relaunch, the GDFC have commented that the consumer will experience improvements in the way loans are applied for, and the general online user experience.
But essentially, the overall benefit will be that the cost of these fairly sizeable undertakings will be paid back through the monthly payments of electricity bills.
The loans on offer are designed to last as long as the estimated life of the energy efficient measure installed, up to a maximum of 25 years.
So according to ThisIsMoney.co.uk, if you took out a loan for £3,000 for a new boiler and the boiler had a 12-year term, the loan repayments would be calculated at £250 a year, or £20.80 a month, plus interest of 9.5 per cent on the decreasing loan.
However, the GDFC says these loans are designed to be ‘cost neutral’ as the theory is the energy efficient measures lower a household’s yearly bills, and the repayment comes from the savings made on energy costs.
While the payments are low, there is still a relatively high rate of interest applied to the loan and the longer the term, the more interest you will end up paying.
However, it is possible to pay it back sooner without penalty and there are no late payments fees either.
The GDFC says that when compared to traditional unsecured consumer credit, these loans will have a higher acceptance rate because the overall default rates will be low. It also says it’s an attractive offer as the loan is part of package which includes installation, so homeowners don’t have the hassle of sourcing finance and then arranging installation.