Reward your effort with special programs for energy-wise home improvements
By Michael D. Larson • Bankrate.com

Sure, people can save money by boosting the energy efficiency of their homes. But how are they supposed to come up with $10,000 to pay for those heat pump/duct work/double-paned window installation jobs?

Turns out, it's easier than you might think.

State agencies, utilities, lenders and other organizations offer a myriad of special loan programs designed to reduce the cost of energy-related home improvements.

These loans feature low interest rates, generous repayment terms and inexpensive or no fees, all of which can help homeowners slash their energy bills without breaking their budgets.

"Often, that contractor when he begins to talk about the cost of that replacement system, there's a customer that hasn't even thought about that for 22 years and now they're realizing it's not just $1,000 or $2,000, it's $4,000 or $5,000," says Bob Seaton, manager of retail energy services for the city of Tallahassee, Fla. That makes customers' eyes widen, he adds, but they feel much better when they learn Tallahassee's city-run utility will lend them money to pay for the improvements at a super-low rate.

"People can use it for the installed cost -- equipment and installation both," he says. After installation, "you're talking about some pieces of equipment being twice as efficient as others. You're cutting the costs in half and that's quite a significant thing."

A variety of sources
Energy efficiency programs come in many different forms. Some utility-backed loans make it cheaper to purchase electricity-fueled heating and air conditioning systems. That helps homeowners save money while boosting electricity demand and, therefore, utility company revenue. Other loans backed by state energy agencies are designed to promote energy conservation. Homeowners can use these to do everything from upgrade doors and windows to install more insulation. No matter who backs them, though, most have a major advantage over private-market alternatives -- they save borrowers money.

In many cases, they have rates that are lower than the rates on other products customers might use to pay for improvements, such as credit cards and personal loans. Energy-efficiency loans typically don't come with fees either and some aren't secured by liens against the home. That makes them cheaper to obtain and safer to take out than home equity loans. Lastly, the underwriting process is generally less cumbersome.

Tallahassee homeowners can borrow up to $7,000 over a five-year term at 5 percent interest with no fees and no credit or income review, for instance. The city does check to see if a borrower owns the subject home and secures its loan with a lien against the property. But the only other thing it does is verify that the customer hasn't paid a utility bill late during the previous 12 months.

SouthTrust Bank, meanwhile, offers a no-fee 15.25 percent rates on personal loans in the Tallahassee market, according to Bankrate.com research.

In Nebraska, Jerry Loos sees heightened demand for energy efficiency loans. The Nebraska Energy Office spokesman says requests for the state's "Dollar and Energy Savings Loans" haven't fallen off so far the way they usually do this time of year.

Nebraska residents can borrow up to $35,000 at 5 percent interest for as long as 15 years under the program as long as the planned improvements meet certain standards.

Customers get the loans from banks, credit unions and other institutions that sign up with the state to offer them. While the institutions can charge some fees -- such as overhead fees up to $50 on all loans and 2 percent origination fees for borrowers who choose the maximum loan terms allowed -- the super-low interest rate makes the loans attractive nonetheless.

"To get access to this cheap financing, you've got to put in that which is the most energy efficient," Loos says. "But it does pay itself off just as fast if not faster than the less efficient" equipment.