From Guest Blogger Jenny Richards: How to Ensure You are Borrowing Your Green Loan Responsibly

In the recent past, there has been a lot of support by banks and governments to encourage individuals and business owners to invest in eco-friendly “green” projects.

Lenders have developed attractive loan packages for home owners and businesses alike, and some of them can finance up to 100 percent of the investment cost.

As well, certain regulations have been put in place to encourage banks to give a specified percentage of their loans to green projects.

The intention behind all this support is great because we all, obviously, need to embrace green practices if we are to save the planet and save money. Green projects lead to sustainable business growth as they reduce the amount of money spent on resources such as energy and water.

However, the effect of lax lending practices can be catastrophic if businesses and even individuals get access to loans that are too much to pay back.

In 2014, some startup green technology companies in the U.S collapsed after having incurred hundreds of millions of dollars in green energy loans.

Green projects are good and they should be encouraged and even given extra support. There is no problem taking a loan if you have factored what it means to you financially. The key is to ensure that you are borrowing responsibly.

Below are some of the factors to remember to ensure you are borrowing responsibly.

• Consider if it’s the right time for you to commit to a loan

Do not be lured by all the promotions. Even though there are a lot of offers to encourage lending, you will have to shoulder your loan on your own.

• Understand all the terms

Do not get the loan processed until the creditor has given you all the information about the loan. You should understand;

• Interest rates
• Repayment period
• The consequences of failed payments

• Don’t sign a contract you haven’t read

Read the contract from start to finish. If you don’t understand anything, do not sign. If the lender is not clear about something, take the loan forms away and ask a contract lawyer to explain to you.

• Only borrow an amount that will not strain your income

Have a look at your income versus your expenses and determine whether there is any room for an additional loan.

After you get your green loan:

• Don’t skip your debt payments

Your green loan will still be part of your credit report. Honor the payment date to avoid ruining your credit record.

• Inform your creditor when you cannot repay

If at some point you start struggling with making payments, inform your creditor about it and get a repayment plan.

Important points to note about loans

• The shorter the loan period, the cheaper it will be in the long run. Even if you’ve got a couple of years to repay your loan, try to repay in a fraction of that time.
• Don’t get adjustable interest. If your creditor does not give fixed interest, look for one who will. This will prevent rude surprises in the future.
• Read the terms and conditions of the loan.
• Check for additional monthly costs.