Clark says one will lend up to $50,000 at 0% \u201cZero. 0%\u201d but because that loan must be repaid over a shorter term, it can create a cash flow squeeze despite the low interest rate.<\/p>\n
\u201cIf you pay that off over the maximum five-year loan term, essentially it\u2019s around $200 a week,\u201d Clark says.<\/p>\n
Other banks offer up to $80,000 at 1% for three years, which is easier from a cashflow perspective, but there\u2019s a sting in the tail. <\/p>\n
\u201cThe big difference … is that they\u2019re over the standard documented loan. Yes, it\u2019s 1% for three years – fantastic, cheap money – but you potentially could be paying for that car for 30 years.\u201d<\/p>\n
Adam Clark of Squirrel Mortgages says green loans may look like “free money” but can cause a cash flow squeeze despite the low interest rate. Photo \/ supplied<\/p>\n
Plus, once the cheap period ends, the debt becomes subject to normal interest rates. <\/p>\n
\u201cYou\u2019ve paid almost nothing off. Instead of 80,000, it might be 75. It\u2019s at 5%, 6% \u2013 whatever the rate of the day is \u2013 so it becomes a lot more expensive,\u201d Clark says. <\/p>\n
The intent of green loans is to either reduce home running costs or add value to the home \u2013 but borrowers can also use them to purchase an electric vehicle \u2013 a popular option while fuel prices are high. <\/p>\n
While a car isn\u2019t a green loan\u2019s primary purpose, Clark says \u201cIt is the cheapest way to fund it. Bar none, it\u2019s fantastic.\u201d<\/p>\n
However, he cautions against using the low rates to spend more. \u201cThis is a short-term \u2018make hay while the sun shines\u2019 opportunity,\u201d he says.<\/p>\n
It\u2019s also worth being strategic about repayments. \u201cWe don\u2019t aggressively pay down the 1% loan because that\u2019s cheap,\u201d Clark said. \u201cIf you\u2019ve got a 5% two-year fixed rate, if your bank allows it, prioritise paying that off first.\u201d<\/p>\n
\u201cWhere you\u2019re putting your cash flow is super, super important.\u201d<\/p>\n
Watch or listen to the full episode of The Prosperity Project<\/a> for more.<\/p>\n The Prosperity Project is hosted by Nadine Higgins, an experienced broadcaster and financial adviser.<\/p>\n Follow the show at iHeartRadio<\/a>, Apple Podcasts<\/a>, Spotify<\/a> or wherever you get your podcasts. New episodes are released every Monday.<\/p>\n","protected":false},"excerpt":{"rendered":"Clark says one will lend up to $50,000 at 0% \u201cZero. 0%\u201d but because that loan must be…\n","protected":false},"author":2,"featured_media":421449,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[1396,4057,682,48039,138,56605,4187,4975,2518,538,1345,13840,10527,13457,661,216389,300,111,139,69,28243,8617,3263,20586,1519,223,2846,4504,4468,8222],"class_list":["post-421448","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-banks","tag-behind","tag-being","tag-borrowers","tag-business","tag-closest","tag-cost","tag-free","tag-green","tag-hidden","tag-home","tag-like","tag-loans","tag-look","tag-major","tag-mismanaging","tag-money","tag-new-zealand","tag-newzealand","tag-nz","tag-offered","tag-offers","tag-project","tag-prosperity","tag-risks","tag-the","tag-them","tag-theres","tag-thing","tag-warned"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/421448","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=421448"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/421448\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/421449"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=421448"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=421448"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=421448"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}