Financing a new boiler

Thursday 4th July, 2013 By Martin Fagan
Financing a new boiler

A new boiler is a big investment which can hit your finances hard, especially if your old one breaks down unexpectedly. But there could be help available.

As well as a range of grants and special deals from the government and energy providers themselves, you can also look into getting finance from your energy supplier, or taking out a low-rate personal loan.

Here's our guide to financing a new boiler.

Grants

New boilers are not only expensive; they're also more efficient and environmentally friendly. Because of this, the government is keen to encourage replacements and offer incentives to people who would otherwise struggle to pay for a replacement.

For 10 years until January 2013, the government offered the Warm Front scheme that offered a package of insulation and heating improvements up to the value of £3,500 to low income families and other vulnerable households around England.

But that was replaced by the Green Deal where homeowners borrow up to £10,000 to pay for energy efficient improvements to their home. However, consumer watchdog Which? said that the terms of the Green Deal - the interest rate, duration of the loan and its terms and conditions - was uncompetitive.

The public seemed to agree, as in the five months since its launch on January 23, 2013 to the June 23, 2013, only two householders had signed up to the Green Deal, according to the Sunday Times.

However, the Energy Saving Trust supplies a list of all other offers and grants available from independent home insulation companies, energy suppliers and local authorities. A simple postcode search will produce a list of each subsidy available in your area - many of which offer extra discounts to people on qualifying benefits.

Energy supplier finance

Most of the big energy suppliers that offer boiler installation will also offer finance options too. However, these are very expensive - with APRs of around 30% on most.

For example, Flexible Finance from British Gas allows you to spread the cost of your new boiler, but charges 29.9% APR.

However, if you do have savings, that could cover the cost instead and you'd probably be much better off using that money rather than borrowing it. Even if your savings are in a high-interest account, you'll probably be making no more than around 4% on it and you'll end up paying far more to British Gas at 29.9% than you would make off these savings.

You should only ever go for finance at this rate if you'll definitely be able to pay the full balance off at the end of the interest free period; otherwise you could end up paying it off over four years at a huge extra cost.

While just under £18 a week might seem affordable and fair, after the 10% deposit you'll end up paying a total of £3,673 for only £2,200 worth of work.

Rather than taking finance from your supplier or installer, you'd be much better off going for a low-rate loan or paying for it on a credit card with a 0% purchases or a low life-of-balance offer instead.

Remember...

Make sure you apply for any grants that you might be eligible for and do contact the Energy Saving Trust, even if you don't think you qualify - not doing so could cost you dearly.

If you do have to take out finance to pay for the cost of your boiler or new heating system, try to avoid supplier finance. It is massively overpriced and an extra ten minutes to apply for cheaper credit could save you more than £1,000.