Friday, March 31, 2006

Solar Energy

U.S. Department of Energy - Energy Efficiency and Renewable Energy
A Consumer's Guide to Energy Efficiency and Renewable Energy
Exploring Ways to Use Solar Energy
Step outside on a hot, sunny day, and you'll experience the power of the sun's heat and the light. That's solar energy.

You can use solar energy to do the following:

Heat your home through passive solar design or an active solar heating system

Generate your own electricity

Heat water in your home or swimming pool

Light your home both indoors and outdoors

To enable your use of solar energy for these purposes, your community may have established solar access planning guidelines and/or ordinances.

If you live in the southwestern United States, you may even have the opportunity now or in the future to buy clean electricity from a concentrating solar power plant.

See Solar Radiation Basics to learn more about how solar energy works.

Learn More
Department of Energy Resources
Solar Energy Technologies Program

The Energy Policy Act of 2005

What the Energy Bill Means to You
The Energy Policy Act of 2005 (EPACT), signed by President Bush on August 8, 2005, offers consumers and businesses federal tax credits beginning in January 2006 for purchasing fuel-efficient hybrid-electric vehicles and energy-efficient appliances and products. Most of these tax credits remain in effect through 2007.

Buying and driving a fuel-efficient vehicle and purchasing and installing energy-efficient appliances and products provide many benefits such as better gas mileage – meaning lower gasoline costs, fewer emissions, lower energy bills, increased indoor comfort, and reduced air pollution.

Some consumers will also be eligible for utility or state rebates, as well as state tax incentives for energy-efficient homes, vehicles and equipment. Each state’s energy office web site may have more information on specific state tax information.

About Tax CreditsA tax credit is generally more valuable than an equivalent tax deduction because a tax credit reduces tax dollar-for-dollar, while a deduction only removes a percentage of the tax that is owed. Beginning in tax year 2006, consumers will be able to itemize purchases on their federal income tax form, which will lower the total amount of tax they owe the government.

Automobile Tax Credits
Individuals and businesses who buy or lease a new hybrid gas-electric car or truck are eligible for, and can receive, an income tax credit of $250-$3,400 – depending on the fuel economy and the weight of the vehicle. Hybrid vehicles that use less gasoline than the average vehicle of similar weight and that meet an emissions standard qualify for the credit. “Lean-burn” diesel vehicles could also qualify, but currently available diesel vehicles do not meet the emissions standard. There is a similar credit for alternative-fuel vehicles and for fuel-cell vehicles.

If individuals and businesses buy more than one vehicle, they are eligible to receive a tax credit for each. If a tax-exempt organization buys such a vehicle, the retailer is also eligible to receive another credit. Companies that buy heavy-duty hybrid trucks are also eligible for a larger tax credit. Currently, there is a $2,000 tax deduction for hybrid vehicles for the remainder of 2005.

This tax credit is for vehicles “placed in service” beginning January 1, 2006, but because there is a waiting list for many hybrids, consumers can receive the tax credit if they arrange to purchase the vehicle this year as long as they do not take possession of the vehicle until January 1, 2006. This tax credit will be phased out for each manufacturer once that company has sold 60,000 eligible vehicles. At that point, the tax credit for each company’s vehicles will be gradually reduced over the course of another year.

Home Energy Efficiency Improvement Tax CreditsConsumers who purchase and install specific products, such as energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment in the home can receive a tax credit of up to $500 beginning in January 2006.

The EPACT also provides a credit equal to 30% of qualifying expenditures for purchase for qualified photovoltaic property and for solar water heating property used exclusively for purposes other than heating swimming pools and hot tubs. The credit shall not exceed $2000.

Improvements must be installed in or on the taxpayer’s principal residence in the United States. Home improvement tax credits apply for improvements made between January 1, 2006 and December 31, 2007.

Business Tax CreditsBusinesses are eligible for tax credits for buying hybrid vehicles, for building energy- efficient buildings, and for improving the energy efficiency of commercial buildings (as outlined in the Energy Policy Act of 2005).

Biodiesel/Alternative Fuels
Small producer biodiesel and ethanol credit. This credit will benefitsmall agri-biodiesel producers by giving them a 10 cent per gallon tax credit for up to 15 million gallons of agri-biodiesel produced. In addition, the limit on production capacity for small ethanol producers increased from 30 million to 60 million gallons. This is effective until the end of 2008.

Credit for installing alternative fuel refueling property. Fueling stations are eligible to claim a 30% credit for the cost of installing clean-fuel vehicle refueling equipment, (e.g. E85 ethanol pumping stations). Under the provision, a clean fuel is any fuel that consists of at least 85% ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen and any mixture of diesel fuel and biodiesel containing at least 20% biodiesel. This is effective through December 31, 2010.

Credit for business installation of qualified fuel cells, stationary microturbine power plants, and solar equipment. This provides a 30% tax credit for the purchase price for installing qualified fuel cell power plants for businesses, a 10% credit for qualifying stationary microturbine power plants and a 30% credit for qualifying solar energy equipment. This is effective January 1, 2006 through December 31, 2007.

Business credit of energy-efficient new homes. This provides tax credits to eligible contractors for the construction of a qualified new energy-efficient home. Credit applies to manufactured homes meeting Energy Star criteria and other homes, saving 50% of the energy compared to the EPACT standard. This is effective January 1, 2006 through December 31, 2007.

Energy-efficient Commercial building deduction. This provision allows a tax deduction for energy-efficient commercial buildings that reduce annual energy and power consumption by 50% compared to the American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) 2001 standard. The deduction would equal the cost of energy-efficient property installed during construction, with a maximum deduction of $1.80 per square foot of the building. Additionally, a partial deduction of 60 cents per square foot would be provided for building subsystems.

Energy-efficient appliances - This provides a tax credit for the manufacturer of energy-efficient dishwashers, clothes washers, and refrigerators. Credits vary depending on the efficiency of the unit. This is effective for appliances manufactured in 2006 and 2007.

Below are samples of anticipated tax savings and energy savings for energy-efficient home improvements (as of November 2005):

Product Category
Product Type
Tax Credit Specification
Tax Credit

Exterior Windows
Meet 2000 IECC & Amendments
10% of cost not to exceed $200 total

Meet 2000 IECC & Amendments
10% of cost not to exceed $200 total

Exterior Doors
Meet 2000 IECC & Amendments
10% of cost not to exceed $500 total

Metal Roofs
Energy Star qualified
10% of cost not to exceed $500 total

Meet 2000 IECC & Amendments
10% of cost not to exceed $500 total

Central AC
EER 12.5/SEER 15 split Systems EER 12/SEER 14 package systems

Air source heat pumps

Geothermal heat pump
EER 14.1 COP 3.3 closed loop

EER 16.2 COP 3.6 open loop

EER 15 COP 3.5 direct expansion

Gas, oil, propane water heater
Energy Factor 0.80

Electric heat pump water heater
Energy Factor 2.0

Gas, oil, propane furnace or hot water boiler

Advanced main air circulating fan
No more than 2% of furnace total energy use

* Source:

** The IRS will determine final tax credit amounts

Thursday, March 02, 2006

20 signs of a bad loan

By Dana Dratch

If your credit is damaged but you need cash, you might be tempted to accept a loan without worrying too much about the terms. But some conditions and clauses should make you reconsider your options.
"There are some extremely abusive, one-sided contract terms consumers sign because they think that's what they have to do to get the money," says Jean Ann Fox, director of consumer protection for the Consumer Federation of America. But often you can find a better deal if you shop around.

Here are some loan conditions that should make you think twice:

1. Money upfront. "Money upfront is a really bad sign," says Fritz Elmendorf, vice president of communications for the Consumer Bankers Association, a financial services trade group. "Possibly even of fraud." One nominal application fee is fine, he says. But the point of a loan is that they are supposed to be giving you money, not the other way around.

2. Changing interest rate. An adjustable-rate mortgage can be a good thing for some borrowers. But it should be a trade-off. In return for accepting a little uncertainty, the borrower gets favorable terms, like a lower rate. Too many times in the subprime market, borrowers are saddled with adjustable-rate mortgages simply as the cost of getting a loan, says Michael Stegman, professor of public policy and director of the Center for Community Capitalism at The University of North Carolina at Chapel Hill.

If you have a rate that can change, you have to ask some questions. "You want to know what is the worst-case scenario, not best," says Norma Garcia, senior attorney with Consumers Union. "What's the worst this can get? Will that be OK?"

Realize that a changing rate makes the loan a much riskier proposition for you. In a recent study of subprime mortgage refinance loans, ARM features boosted the chances of foreclosure by 49 percent, Stegman says.

3. Balloon payment. "The ideal is: Don't have any balloon payments," says John Taylor, president and CEO of National Community Reinvestment Coalition, a trade association of community groups. The worst scenario: The balloon is due early in the loan. "It makes a huge amount of money due right away, and most people in the subprime market really can't afford to do that. So for a lot of people, they end up losing everything."

In subprime mortgage refinance loans, borrowers with a balloon payment have a 46 percent greater chance of foreclosure, says Stegman.

4. Too much money. More is not always better. So raise the red flag if a lender is trying to talk you into a larger loan. Two red flags if your home is the collateral. If you have to borrow, take the least amount for the shortest time period with the lowest APR.

5. Excessive fees. "Some fees are truly legitimate," says Garcia. "Some are backdoor fees that don't appear in the disclosure." What you want to watch out for is excessive or hidden fees. Add everything up yourself. The sum of the terms you shopped should equal what's in the loan documents. If it doesn't, you need to ask some questions.
"The title insurance policy should be something competitive," says Taylor. And if you're refinancing, you should get a refinance rate on the policy -- often half the cost, he says. "In terms of points, you shouldn't pay more than 1 to 2 points even in subprime situations. You can find competitive subprimers who will make you loans at those rates."

6. Additional services you don't want or need. Some loans are bundled with insurance policies to pick up payments or pay off the loan if you die or become disabled. Assuming you want the coverage (and can't get it cheaper from your insurance company), the problem is that many times you pay for the entire policy upfront and it's rolled into the loan with interest, Taylor says. So if you refinance that 30-year mortgage after five years, you'll have paid for 25 years of insurance that you won't use and can't recoup. If you want the feature, look for a pay-as-you-go version.

7. A credit card that taps your home equity. You don't want to squander home equity on a thousand little everyday purchases, says Garcia. "That's a real scary prospect."

8. High interest rate. The difference between prime and subprime rates will vary with the length and type of loan. With a mortgage, 5 percent to 6 percent above prime and "it's time for the customer to look around and see if they can do better," says Allen Fishbein, director of housing and credit policy for Consumer Federation of America.

Even if your credit is bad, shop around and be sure to include a credit union and a bank that makes both prime and subprime loans on your list.

9. No minimum loan term. Often with a payday loan, the entire loan (interest and principal) is due very quickly, says Fox. That means the borrower will be borrowing again just to keep pace with the debt, creating a never-ending cycle.

10. Requires a valuable asset as collateral. It may seem obvious that car-title lenders and pawn shops are a gamble because you risk losing the item if you can't come up with cash you already don't have. But consumers think nothing of putting their houses on the same block with a home equity loan or line of credit. "The worst are home equity second mortgage loans, all of the loans that are secured by the roof over your head," says Fox.

11. Binding mandatory arbitration clause. What is this? Before you sign for the loan, you forgo any rights to sue for any reason and instead agree to binding arbitration. The problem: Many consumer advocates believe that arbitrators' decisions tend to favor the lenders and deny borrowers the right to due process.

Some of the big lenders are moving away from arbitration clauses, says Fishbein. But they're still around in the subprime market.

"This should be freely entered into at the time of dispute, not as a condition for obtaining the loan," he says. "By agreeing to this provision if a dispute should arise, the table is tilted toward the lender."

12. Prepayment penalties. For the borrower, this fee "adds to the cost of credit," says Fishbein. Reason: If your financial situation or credit improves, you can't refinance your loan at a better rate. "It's one of the features we find particularly bothersome in subprime loans," says Fishbein.
Some credit experts advise avoiding prepayment penalties altogether. Others caution that one year is fine. Still others recommend keeping it to three years or less.

Prepayment penalties also increase the odds of foreclosure, says Stegman. In his study of subprime refinance loans, consumers with prepayment penalties of less than three years had a 15 percent higher rate of foreclosure. With three years or more, the numbers went to 20 percent.

And make sure the loan doesn't use the Rule of 78 to calculate interest. It's an antiquated method and "a hidden prepayment penalty," Fox says. What you want to see instead: the word "actuarial." That means "you pay for credit for the actual length of time you use it," she says.

13. Balance transfer fees. "Depending on how much you're transferring, it can be a lot of money," says Garcia. "It's something that's really easy to overlook and can cost you hundreds of dollars."

14. The lender solicited you for the loan. Face it, you get the best terms when you shop around and compare. If you're just accepting what was offered, you probably could do better.

15. Teaser rates. Who are they teasing? The person whose name is on the bill. Read the fine print, and go with a lender who's willing to give you a good rate and stick with it.

16. It comes with a free vacation. "If it's a product that's that good, you don't have to add something to make it attractive," says Garcia.

17. High pressure tactics. Are you being urged to sign immediately? "Don't do that," says Garcia. Instead, have a third party look through the paperwork. Some possible candidates: an accountant, lawyer or someone at your local bank (if they aren't making the loan). Or call a local credit counselor affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counselors.

"If it's good today, it will be good tomorrow," says Garcia.

18. The lender is focused on your assets, not your income. Whether you're pledging your car title or your home equity, if you're a bad risk and the lender doesn't care, that should set off the warning bells. "The biggest thing that would send me running: 'no job, bad credit, bankruptcy -- no problem because you have equity in your home,'" says Garcia. "If you don't have income, you're going to default, and you will be out of your home."

19. A slew of "little" red flags. You may be able to negotiate a couple of unfavorable terms. But if the contract is loaded with them, you might just want to walk. A multitude of bad loan terms in combination could create a financial disaster.

The most dangerous triumvirate: an adjustable rate, prepayment penalties and balloon payments. "You really don't want to have these combinations of terms," says Stegman. Not only are you setting up a financial risk, but you're also limiting your escape options.

20. Terms you don't understand. Loans have gotten a lot more complicated. And with the addition of concepts like interest-only loans, adjustable rates and negative amortization, you might feel like you need an economics degree just to shop around. The truth is you might be better off with a more standard loan.

"Borrowers have to be asking a lot more questions than they were before," says Fishbein. Especially tricky: What's the payment, how often will that change and what's the worst that it could get? And if increases are capped, does that mean the lender will add payments to the end of the loan?

"You need to do the math," he says, "and ask a lot of questions."