Banks provide their loan offers with different names, which are used primarily for advertising, but also provide information about the type of loan offered and the projects to be financed. A fairly new term that can be found in many publications and advertisements is eco-credit. What is meant by such?
What are eco-loans for?
Eco-credit is the catchy abbreviation for an ecological loan . By its nature, ecology does not refer to lending, but to the object to be financed. Depending on the bank, eco-credit can be used to finance motor vehicles with particularly low fuel consumption or special vehicles such as cars with a hybrid engine or an electric drive.
When building a house or when renovating a house, the eco loan is particularly suitable for the installation of a solar system or for the installation of a heat pump. In addition, some banks grant eco-loans for the improvement of thermal insulation.
The exact projects that support them with discounted eco-loans are taken by commercial banks themselves, while KfW (Kreditanstalt für Wiederaufbau) supports measures that are subsidized by the legislator.
What advantages do eco-loans offer?
The most striking advantage of eco-loans is their noticeably improved interest rates compared to non-discounted loans. In many cases, banks also allow their borrowers to prematurely redeem part of the green loan without charging early repayment penalties.
Furthermore, many financial institutions refrain from securing a land register in an eco-loan for a constructional measure, thereby saving the landowner costs and maintaining simplified access to further loans.
For some measures, such as the construction of a solar power system, the feed-in tariffs guaranteed by the Renewable Energy Act, which the plant achieves after commissioning, can be used as collateral, increasing the borrower’s credit rating and further reducing the interest payable.
Also compare other offers before borrowing
In many cases, eco-credit is the cheapest financing option. However, real estate owners and builders should review different offers.
In particular, financing by means of a rents-based building savings contract, but also offers from regional banks can be just as favorable as a special eco-loan in individual cases, especially since these also make their interest rates dependent on the ecological effectiveness of a planned measure.