The Green Deal explained

What is Green Deal ?

The Green Deal is a new way to pay for energy-saving home improvements. You can take out Green Deal finance to pay for measures such as loft, cavity or solid-wall insulation, double glazing, a new boiler or even a ‘micro-generation’ system, such as solar panels. The loan is repaid through savings made on your electricity bills, so your bills shouldn’t be any higher than usual. Once the loan is paid off you can take full advantage of the energy savings.

You can save even more money by switching your energy provider. Don’t pay more than you need to for energy – use our independent switching service Which? to find the cheapest gas and electricity tariff for your home.

How do I get started?

If you’re interested in a Green Deal loan, you will first need to arrange a visit from an assessor accredited with the Green Deal Quality Mark. All companies involved in the Green Deal must bear this mark and comply with a code of practice.

The Green Deal is attached to the house not the homeowner

How is the Green Deal different?

In the past, insulation has been available free of charge or heavily discounted through schemes funded through everyone’s energy bills. The most recent free insulation scheme (Cert) finished in December 2012 but some energy companies still have offers – check our round up of the top free and cheap insulation deals to track down the best.

The Green Deal differs significantly from old energy schemes, as it can involve taking out a loan to help pay for the energy-efficient measures. The loan is paid back through your electricity bill and is attached to your electricity supply, rather than you as an individual. This means that if you move, it will pass on to your home’s next owner.

We explain how the Green Deal works in more depth, below – or you can go straight to the home improvements covered by the scheme. The Green Deal is a complex product so make sure you research it well.

Can I claim from the Green Deal Home Improvement Fund?

The Green Deal Home Improvement Fund gives households the chance to claim money from the government for installing energy-efficient measures.

To see if you’re eligible to claim for any cash, and for a full list of the measures you can apply for, see our expert guide to the Green Deal Home Improvement Fund.

Green Deal loans allow you to make energy-efficient upgrades to your home without the upfront cost

Green Deal loans

Green Deal loans are repaid through your electricity bill. The way the deal differs from a standard loan is that the repayments you’ll make on the loan will (in theory at least) be covered by the energy bill savings you make from having the energy-saving home improvements installed. This system is known as the ‘Golden Rule’ – you should not pay back more in loan repayments than you are saving on your energy bill.

But the Golden Rule is not a guarantee, just a guideline based on energy-saving estimates. So it’s also possible that repayments could be more than your savings while your plan is in place – meaning you would have to find extra cash to fund the difference.

The range of available interest rates varies from provider to provider. However, the Green Deal Finance Company has published a list of example rates, on which the APR ranges from 7.9% to 10.8%. Over a long period, this rate of interest will add a significant amount to the cost of the products you buy. Some providers will also charge a one-off admin fee of £63 and an annual fee of £20 for each loan, while others will absorb this cost for you.

You will have to go through a credit-checking process to obtain a Green Deal loan, and the rates of interest on Green Deal loans are decided by each individual provider. The government has stated that anyone who falls into arrears on their energy bills with a Green Deal loan attached is protected by the obligations on arrears followed by energy suppliers. This means that you must let your Green Deal provider know, and it will offer you advice and help work out a payment plan based on what you can afford.

For more details about Green Deal loans and alternative ways to pay for the Green Deal.

What Which? thinks of the Green Deal

As with any financial product, whether the Green Deal is a good deal will depend upon your personal and financial circumstances. You may be able to get a lower interest rate through other ways of borrowing. You could use your own savings for energy-efficiency measures and make up the difference with government money from the Green Deal Home Improvement Fund – to get this, you don’t have to take out Green Deal finance, or even have a Green Deal assessment now.

If you do get a quote for a Green Deal plan, we advise that you read all the terms carefully and consider all the implications before signing up to this long-term financial commitment. Green Deal plans will have different interest rates, charges and conditions, depending on your Green Deal provider, the measures you choose to install and the term of your plan.

The government is making improvements designed to simplify the Green Deal process. Thanks to Which? campaigning, early repayment fees have now been scrapped. We think more needs to be done to ensure fair terms, such as to reduce the risk that low users of energy might not see any financial savings under the Green Deal. We will continue to press the government to make further improvements.