Loans for boilers

How can I finance a new boiler?

Several options are available to you when looking for help to finance your boiler purchase. These include:

• Personal loan. A personal loan is when you borrow a certain amount of money from a lender, and you pay this back over an agreed period by monthly instalments, with interest. You may wish to consider a loan to help pay for your boiler as you receive the money upfront.
• Boiler finance schemes. Many energy providers and boiler manufacturers offer these schemes in the UK. You can pay for your boiler in monthly instalments, making it easier to manage. You might be able to choose from an interest-free deal whereby you pay off the amount owed in 2 to 3 years. Or you might be able to repay the debt over a longer period, with interest added.
• Credit cards. You might want to use a credit card to buy your boiler. If you do, you can repay the amount borrowed over time, but you’ll have a minimum payment each month. Consider using a 0% purchase card, as this spreads your payments interest-free for a number of months. However, the best deals are reserved for those with good credit. If you have poor credit, it might be worth looking at a credit-builder credit card, designed for people with little to no credit history or a low credit score. However, you usually can’t borrow as much, so it might not cover the new boiler’s full cost. Interest is usually charged on repayments, too, so it could be very expensive.
• The government boiler grant scheme. Not a loan but a grant given to people on certain benefits. It’s definitely worth checking to see whether you qualify. Most energy suppliers are part of the Energy Company Obligation scheme, which is part of an energy efficiency initiative to reduce carbon emissions. It will often focus on installing insulation in your home, but in some cases, you could get a grant to help you replace an old, inefficient boiler. The money won’t need to be paid back.

Key features of personal loans at a quick glance

• Loan terms. The terms can include the loan duration as well as interest rates and repayment plans.
• Loan amounts. The amount of money you can borrow.
• Get a personalised quote. This will give you an indication about the terms in which a provider will lend you money and will have no bearing on your credit rating.
• Price matching. Some providers offer a price guarantee to match or beat offers from other providers.
• Monthly repayments. You can repay your loan in monthly instalments.
• Repayment holidays. This is an agreed period with your lender, perhaps either 1 or 2 months, where you will not have to make repayments. However, interest will still build up.
• Quick decisions. Providers will usually make a fast decision about whether they will lend you money.
• Access to funds. You can get access to all the funds upfront.
• Fees. You may incur extra costs, such as interest or late payment fees.
• Perks. Some loans have special benefits, such as a 0% interest period.
• Overpayments. If you wish to pay off your loan sooner than agreed, making overpayments is the way to do it. Most overpayments will not incur a penalty so long as you remain within the overpayment limit. It is important to check the small print of your loan before you make an overpayment.
• Early repayment. For many loans, you will incur a penalty and additional costs if you repay your loan in full earlier than expected.

How should I compare different loans for boilers?

There are several important factors to consider when comparing loans. We’ve listed some of them below:

• Loan amount. The amount of money you can borrow differs between lenders.
• Interest rate. Some loans available are interest-free. If the loan is not interest-free, make sure you consider the interest rate.
• Fees. You may be required to pay upfront or ongoing costs that will add to the cost of your loan.
• Eligibility criteria. Whilst you may be eligible for some loans, you may not meet the criteria for others.
• APR. The Annual Percentage Rate is designed to present consumers with an annual summary cost for the loan, including any set-up fees and interest. Different loans have different APRs, and they are only representative. Your costs may be more expensive.
• Loan terms. The length of the loan period and other terms and conditions may differ between providers.
• Overall cost. As well as the loan amount, you should consider any set-up fees and interest.
• Early repayment. Although you may find yourself in a position to pay off your loan early, some loans charge extra costs if you repay your loan too early.

Am I eligible for a boiler personal loan?

You should only apply for a personal loan to finance your boiler if you are positive you can meet the repayment terms. Otherwise, you will face additional costs, and it may impact your credit rating if you miss payments.

Exact eligibility criteria vary depending on the loan provider, but you typically need to meet the following requirements:

• You are over the age of 18.
• You have been a UK resident for over 3 years.
• You have a regular income.
• If self-employed, you have been so for over 2 years.
• You have a good credit rating, with no history of bankruptcy or county court judgement.
• You hold a UK bank or building society account that can pay direct debits.

Some providers might set minimum income requirements, and some might have a maximum age limit. So, it pays to check the terms and conditions carefully.

How can I apply for a loan?

If you have decided that a provider’s loan is right for you, simply fill in the application form for the loan via their website. You will need proof of the following:

• Your ID
• Your address details for the past 3 years.
• Your current income and employment details in the form of payslips and bank statements.

Pros and cons of using a personal loan for a new boiler

Alternative finance options

If you’re not sure if a personal loan is the best option for you, you could also think about:

• A 0% purchase credit card. This allows you to spread the cost of your purchase over a number of months interest-free. Just make sure you’ve cleared your balance before the 0% deal ends and interest kicks in. Credit limits are usually lower than personal loans but might be enough to cover the cost of your new boiler.
• A 0% money transfer credit card. Here, you can transfer money from your credit card to your bank account and then use the funds to pay for your new boiler. Again, no interest is charged for a set time, but you must clear your balance before the 0% period ends. There’s usually a transfer fee of around 4% to pay.
• An overdraft. If you’re lucky enough to get a bank account with an interest-free overdraft, this is another option worth exploring, particularly if you don’t need to borrow a large sum. Overdrafts can be quick and easy to arrange, but make sure you don’t exceed your limit.
• A boiler finance scheme. As mentioned earlier, many boiler manufacturers and energy suppliers offer their own finance schemes to help you fund a new boiler, so these could be worth looking into.

Bottom line

If your boiler has packed up and you can’t afford to replace it, don’t panic! There are quite a few options to restore hot water to your household. Whether you’re applying for a loan or a financial scheme, make sure you are aware of the risks and that you can commit yourself to monthly instalments until the loan amount is paid back in full. Failing to do so could negatively impact your credit score – Hot water you don’t want to find yourself in.

Frequently asked questions

• What criteria would I need to meet to be eligible for a government grant?

  There are several criteria you need to meet. These include claiming certain benefits and living in private housing (as a homeowner or tenant) or living in social housing. Qualifying benefits include: pension credit, child tax credit, income support, working tax credit or universal credit.

• Who provides the boiler finance schemes?

  They are currently available in England, Scotland and Wales from boiler suppliers, manufacturers and most energy supply companies.

• Are there any downsides to the boiler finance schemes that I should be aware of?

  As with any loan, there are some downsides. If interest is charged, you will end up paying back more than the cost of your boiler and installation, and if you miss a monthly payment, it will affect your credit rating. If you miss several payments, your debt may even be forwarded to a debt collection agency.

• Will there be a credit check if I am applying for a boiler finance scheme?

  Yes. A credit check will be carried out, and a decision should be available within minutes. If your credit rating is not great or you have no credit history, you may wish to consider a credit-builder credit card.

• Does British Gas do personal loans?

  British Gas acts as a credit broker and can help you arrange a personal loan through one of its partners. It doesn’t offer loans itself.

• How much does a new boiler cost?

  A new boiler can cost around £500 to £3,000, depending on the type of boiler. If you add the installation cost into these figures, you’re looking at somewhere between £2,000 and £4,500.

To make sure you get accurate and helpful information, this guide has been edited by Holly Jennings as part of our fact-checking process.

Written by

Rachel Wait

Writer

Rachel Wait is a freelance journalist and has been writing about personal finance for more than a decade, covering everything from insurance to mortgages. She has written for a range of personal finance websites and national newspapers, including The Observer, The Mail on Sunday, The Sun and the Evening Standard. Rachel is a keen baker in her spare time. See full bio