Commonwealth Bank adds new green loans for environmentally friendly finance - how do they compare?

Commonwealth Bank has entered the green finance game with their new discounted personal loans for sustainable spending. 

If you’re looking for a personal loan from CBA, you’ll be spoilt for choice: Commonwealth Bank offers sustainable options for both secured and unsecured loans, as well as fixed and variable rate loans.

Why should I choose a green loan?

Green loans are fast growing in popularity and can be a great option for customers looking to invest in environmentally friendly home renovations like solar panels or sustainable energy. They can also be used as green car loans to purchase electric vehicles (EVs), saving on petrol and reducing your carbon footprint. 

In order to entice you to choose a more sustainable car or plan for renovations, green loans may offer lower interest rates than the equivalent loans that don’t need to be spent on sustainable options. 

Alternatively, some lenders may move into the realm of predominantly green loans. Though this is far off, we have seen Bank Australia plan to phase out new car loans for petrol and diesel vehicles by 2025.

How do Commonwealth Bank’s green personal loan rates work?

As growing numbers of lenders make steps towards improving the ethical banking landscape, you might be wondering just how CommBank’s new green loan options work - and whether they’re worth your time.

You’ll need to consider the eligibility of your plans for these loans. CBA specifies a list of eligible purchases that these loans can be used for, including:

• Electric or hybrid cars 

• Solar panels

• Battery packs

• Solar hot water systems

• Heat pump water systems

• Electric car charging stations

Conditions do apply to the above surrounding size and output, so make sure to check the Commonwealth Bank website for details. Battery packs, inverters, and solar panels must all be installed by a Clean Energy Council approved retailer or installer to be eligible, so no skimping out there!

At the time of writing, unsecured personal loans from CommBank have interest rates ranging from 7.5% to 19.5% p.a. (8.41% to 20.34% p.a. comparison rate*) for both variable and fixed rate loans. Applying for the unsecured green personal loan to finance eligible sustainable projects will mean you’re eligible for a lower rate of 6.5% p.a. (7.42% p.a. comparison rate*).

Terms for these unsecured loans are set between 1 - 7 years with a flexible repayment schedule, and you can borrow between $4,000 - $50,000. There is an establishment fee of $150 to keep in mind, as well as a $10 monthly service fee. Late payments will cost you $20, but you are free to make additional repayments. 

If you’re looking to buy an EV or hybrid electric car, you may be interested in their secured loan option. Most of the above still apply, but you can borrow between $4,000 - $100,000 and the initial establishment fee is $250.

CBA’s secured loan interest rates are naturally lower than their unsecured loan rates, but this is taken to the next level with the secured green personal loan. The interest rate for the secured loan starts from 5.99% to 11.99% p.a. (7.05% to 13.02% p.a. comparison rate*) at the time of writing, but drops to 3.99% p.a. (5.07% p.a. comparison rate*) for eligible sustainable purchases. 

Which green loan is best?

While there is no easy answer to which loan is best for you (you will need to consider your own needs and finances), it does get more and more important to be able to spot the differences between the options available on the market.

Most lenders are now offering a significantly lower interest rate for green loans. This is not super common with the major banks, but can be seen widely with online lenders and smaller institutions.

• Westpac offers preferential rates for hybrid and electric cars, with a 1% discount off their regular car loan.

• Bendigo Bank has unsecured and secured green loans that can be used on a range of sustainable purchases.

• Australian Mutual Bank’s green personal loan won the Mozo Experts Choice Award for Best Green Loan in 2022

• The lowest interest rates in our personal loans database are for environmentally sustainable loans - Illawarra Credit Union’s Green Eco Loan and Green Car Loan at the time of writing.

Should I choose a secured or an unsecured loan?

If you’re wondering whether to secure your loan with collateral, there are pros and cons for both options. Secured loans use a valuable asset - usually a car or property - to give a lender some assurance that you will pay them back. If you start to miss payments, your collateral can be seized by the lender and sold to make up for their losses. This means that secured loans tend to let you borrow more money and offer lower interest rates (especially when paired with a green discount). On the other hand, an unsecured loan is definitely a safer option if you could ever find yourself in over your head with debt. Though limits may be lower and interest rates higher, you won’t have to worry about your property being claimed.

There is more to a loan than an interest rate - it is important to find features that suit you and conditions that are appropriate for your intended use. With green loans offering competitive deals and allowing you to achieve sustainable goals, you might find yourself with a happy medium.

Stay updated on sustainability in finance with our green finance hub. To find more standout personal loans, check out Mozo’s best personal loans.