Interest Free Government Loans

The author of this blog hasn’t gone crazy.  The government is giving away interest free loans up to the value of $10,000.00.  They are being offered under the “Green Loans Program”, an initiative to help Australians tackle climate change.  The main purpose of the interest free loan is to assist Australians to install solar hot water systems, solar panels and insulation.  If you’re a climate change skeptic, keep reading – there is a sound business case for taking out a green loan.

The interest free loans are actually provided by banks, and the government provides a subsidy to pay the interest.  The only catch is that you have to have a “Home Sustainability Assessment” (which is free) before you can get the loan. The assessment lists the most effective changes that can be made.  The figures on the loan would be: Loan amount $10,000.00, repayments $50.00/week ($650.00/quarter), term 4 years

Is your electricity bill getting more expensive?  The author just received notification in the mail that his power was going to cost 25% more from Jan 2010.  We can be assured that this will increase further in the future; network infrastructure is getting old and our electricity consumption keeps increasing (thanks mainly to air conditioning and down lights).  If the CPRS (Carbon Pollution Reduction Scheme) is passed there will definitely be future price rises, some figures suggest price rises of 40% or 50%

An average quarterly power bill of $300.00 will cost $375 in 2010 and possibly $525 after the CPRS.  A 2.5kw solar power system can be put in place for $10,000.00, or the full available interest free loan.   That will cover all your electricity costs plus, in today’s money you should be able to sell back your extra power to the grid for around about $180.00/week.  Over 20 years the total cost of converting to solar is $7120.00 vs. $30,000.00 for standard power (based on 2010 prices, not indexed for inflation).

From a cash flow point of view, it’s not the best decision; at 2010 prices you won’t break even for 7 years. That is based on current figures though; if the cost of electricity goes up to $525 the breakeven point is 5 years.

To summarise, it’s not every day that you get offered $10,000.00 for “free”.  Interest free loans don’t come along every day.  With rising electricity costs it’s bound to be a smart choice in the long run.  Remember, readers, though that cash is king! If you don’t have income to support the extra $27.00 per week then don’t do it, it’s a long term investment.  Remember also that you have to invest the money you would have paid on your electricity bills.  Don’t spend it; that way you’ll really be ahead.