Solar panels can be financed by homeowners who want to save money on energy or make an investment for a cleaner, more affordable electric power. The average home can save up to $65,000 over the lifetime of a solar panel system, which makes this a worthwhile financial commitment.
Solar financing comes in many forms, each with their own pros and cons. Knowing what you require is important before choosing a financing option.
Solar Panel Loans Interest-Free
Solar panel loans are available at 0% interest. These are subsidized by local and federal governments in an effort to encourage greater adoption of renewable energy systems. They are usually more accessible for those with lower scores of credit and don't penalize people for paying back their loans early.
If you have a home equity loan (HELOC), the value of your house can be used as collateral. This type of solar loan isn't as easy to get as a personal loan, but it can help you lock in a low rate and reduce your borrowing costs over the long term.
Buying Outright
If you have a large amount of cash to spare, purchasing a solar panel system outright is probably the most cost-effective way to go. This is due to the fact that you can benefit from any rebates or tax incentives offered in your region.
Leases and PPAs
Solar panel financing is often done through power purchase agreements. The solar panel power rate is usually set for a period of 25 years. This is typically 10-30% less than what you would pay to the utility. The price can fluctuate every year, so this deal isn't guaranteed.
The federal solar investment credit is not available to those who lease or PPA solar panels. You may also have problems if your plan is to sell your property and you need to relocate your solar panel system.
Solar Loans
Fortunately, there are several options for financing your solar panel system, including loans from banks, credit unions, and third parties. Be sure to pay attention to the APR, origination charges and loan terms. All of these factors will impact the cost to install solar panels. It is important that you shop around and find the best offer.
Residential Solar Financing Options
Solar loans are a popular way to finance a system. Most banks and credit unions offer this option, which is a great way to obtain the funds you need without having to make an upfront investment. It's easier to get a personal loan than a HELOC or traditional home equity loan.