Energy saver loans always sound like a five-step process to lose money. That needs to change.
Energy-saver loans must offer the best customer experience to accelerate emissions reductions; they have a long way to go.
IN THIS ISSUE
Energy-saver loans in their current form sound as if you are pitching your spouse a pyramid scheme. “It’s a loan where we get a cheaper rate… well, a discount to a number that the same bank also decides. With some providers, it’s more expensive than regular loans, and we only get it after doing the work. It may not cover all the work, but we don’t know until the end. Oh, and some people will need to come by the house. We may not get the loan at any stage, depending on what they say. Yeah, we pay those people to tell us we don’t get the loan...”
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Energy-saver loans, green loans, and home efficiency loans must improve.
The current process leaves much to be desired, and it hurts emissions reductions. Let’s walk through it together.
You start the energy-saver loan process by doing your research. Let’s check with the banks. Okay, TD has your attention. There are lots of green words here. It should be good.
But when you click through, it’s just the regular personal loan flow.
Most banks appear to take you to their regular personal loan.
This is because banks prefer to extend credit using existing facilities, such as your line of credit or home equity loan. Underwriting is expensive for bespoke home improvement loans and eats up margin. This isn’t the bank’s fault; it’s just the reality of the work to prepare a small loan with unique qualifications.
Another complexity is that if the government has a program that provides lower-cost loans, banks have less incentive to develop low-cost environmental loans. This is because homeowners repay that loan when the cheaper government-sponsored one arrives, and the bank doesn’t recoup underwriting costs.
At this point, you wonder why banks advertise these loans if everyone puts you in regular lines of credit. Perhaps they’re for renters completing small initiatives, family cottages, or even investment properties where they want to reduce utilities.
Okay, that’s not the case either. Maybe there is a lack of products because people take out loans from providers even though separate loans for your furnace, dishwasher, and solar panels sound like a recipe for disaster.
When you start researching the loans, you are hit with articles on how installers sometimes push customers into high-cost products. Our overview of this dynamic is available here.
You decide not to go with the suppliers. Finally, a zero-interest loan pops up in your search—the Canada Greener Homes Loan.
We were going to make a joke about it, but it’s actually a pretty great product that provides interest-free loans up to $40k. Kudos to the government.
One weird note is that when you go to the application pages, it says the program is “closed,” and we saw complaints online that people were discouraged they missed it, but this is referencing only the grant.
The Greener Homes loan is the best product we’ve seen from our community (please let us know if you’ve found a better one).
The terms to remember, though, are that only “15% of the loan can be delivered up front.”
Additional steps can also increase your timeline even though you’ve likely already paid someone: “Once all planned retrofits are complete, contact your service organization to request a post-retrofit evaluation… This can take up to 30 days.”
Remember that you are also on the hook if the contractor goes over budget, so don’t think you have free money while they make suggestions. Still, luckily, no contractor has ever gone over budget in the history of the world: “If the final costs are higher than the initial estimate, the loan amount will not increase.”
It’s a pretty solid product. You get a zero-interest loan to invest in things that save you money every month and let you pay back that loan with money you made for free - one of the best investments you’ll make. The problem is that you need to meet several qualifications, and it's not designed for everyone.
The financial products for home efficiency additions need to evolve to serve people at scale and accelerate change, and at Emissions Decisions, we plan to be a part of that. If you already provide better products, we would love to highlight you (we are excited to highlight one additional platform next week), and if you want to partner to engineer better products with us, please reach out. We look forward to it.
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