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Solar Loans & Financing Options: Here’s What You Need to Know

Updated: Feb 2



Are you thinking about making the switch to solar in the near future? Adding solar panels to your home can lower your energy bill, help the environment, and even increase your home’s value!


However, solar panels are a bit of an investment, and most people don’t have an extra $25K just lying around. Fortunately, there are numerous solar financing options available for homeowners to take advantage of solar.


First off, what is solar financing?


Solar financing is exactly what it sounds like—it is a form of financing that allows homeowners to pay for their home’s solar panel system in manageable and affordable monthly payments spread out over an agreed-upon term length. This gives homeowners the opportunity to invest in a solar panel system without having to spend tens of thousands of dollars upfront.


With a solar loan, homeowners can finance their solar systems just like they would with a home mortgage, car, or other major renovation. For many homeowners, solar financing presents the most realistic option for going solar.


Pros of solar financing:


Solar loans come with fixed interest rates and monthly payments that won't change over the life of the loan. Most solar loans are also unsecured, meaning you don’t have to put your home up as collateral or have a ton of equity to qualify. This helps to make solar loans very low-risk.


Cons of solar financing:


In order to qualify for the lowest rates, and in turn, the lowest monthly payment and overall interest paid, you’ll need to have an excellent credit score. If your score isn’t that great, high-interest rates can make financing solar panels expensive and increase the amount of time it takes before you begin to see savings.


That being said, the vast majority of people will still benefit from solar financing, especially if they have good credit to secure low-interest rates.


What Credit Score Do I Need to Get a Solar Loan?


While you may need a high credit score to qualify for a low-interest loan, most solar loan providers will accept credit scores as low as 600. Given that the average credit score in the U.S. is about 694, solar loans are very attainable for the majority of American homeowners.


What if I don’t want to finance my solar?


Financing presents an attractive option for many solar customers, but it’s not the only option. If you find yourself looking for an alternative to solar financing, check out these options:


Purchase it in Full


If you have the capital to spare, paying for your home’s solar panel system in full can be the best option.


Lease


Instead of purchasing the equipment like you would if you were to take a loan out, solar leases give homeowners the option to lease equipment from providers for a fixed monthly cost. Homeowners who opt to lease their solar equipment instead of purchasing cannot claim the federal tax credit.


PPA


A PPA (power purchase agreement) is an agreement between a solar provider and a homeowner to purchase solar-generated electricity for a fixed price. Similar to a solar lease, homeowners who go the PPA route do not own the actual solar equipment and are not eligible for the tax credit.


Are solar loans eligible for the federal solar tax credit?


Absolutely. All solar loans are eligible for the federal solar tax credit, which as of December 2020 provides a 26% tax credit for systems installed by 2022 and 22% for systems installed in 2023. Unfortunately, at the time of this writing, the tax credit is set to expire in 2024 unless it is renewed by Congress.


It’s also important to note that solar leases and PPAs are not eligible for the federal solar tax credit. This is because, with a lease or PPA, the homeowner isn’t the party investing the capital in the solar installation or system itself, they’re simply leasing the equipment and/or power from another provider.


What is the Average Monthly Payment for Solar?


The average monthly solar payment can vary greatly depending on a number of factors including loan interest rates, loan terms, the quantity and brand of solar panels, etc. However, solar loan payments are almost always less than your current electricity payment




What to consider when financing a solar project


Just like with any loan, there are a number of factors that homeowners should take into consideration when reviewing their solar financing options.


Loan type: secured vs unsecured


Basically, a secured loan requires borrowers to offer collateral, while an unsecured loan does not.


Loan Rates


The less you pay for the loan, the faster solar panels pay for themselves through energy savings. If you have poor credit, you may want to consider pushing back a solar installation so that you can improve your score to obtain lower rates/payments


Solar Loan Down Payment Requirements


Most solar loans are zero-down, however, those with poor credit may need to put as much as $3,000 down. The down payment may vary depending on the size of your solar panel system, materials, location, etc.


Solar Loan Lengths


The average solar loan length is 10-20 years. That’s a lot of time, so it’s important to figure out a monthly payment that works for you. If you get a shorter loan, your monthly payments may end up being too high. On the flip side, a longer loan with cheaper monthly payments means you’ll be paying more in interest.


How can Complete Solar Help You?


At Complete Solar, we want to make life easier for homeowners interested in going solar by streamlining the entire solar process, from securing your solar loan and financing to the actual installation itself.


Our team of solar experts can answer any questions related to solar loans and can help guide you through the residential solar process. Ready to see how much you could save by switching to solar?





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