Home Solar Financing
Many people think that solar panels are out of their budget, but statistics from the U.S. Department of Energy, show that the cost of photovoltaic solar systems has actually dropped over 65% since 2010. The solar industry has grown substantially over the last 70 years and home solar is more accessible than ever with lower manufacturing costs, increased availability, and the introduction of significant government incentives.
Homeowners today are more capable of financing the cost of solar panels through a variety of options, including low-interest loans, leasing, and some help from the federal solar tax credit. Below are all the different financing options available to homeowners who are thinking about or want to go solar.
Financing Solar Panels Can Increase the Value of Your Home
According to CNBC, when you opt to buy or finance solar panels for your home, you can increase the value & equity in your residence by as much as 4.1%! Additionally, a recent study from Lawrence Berkeley National Laboratory found that installing solar panels added $4 per watt of equity to the homes in the study. If you install a 5kW (5,000-watt solar system) you can potentially increase your home’s equity by $20,000 or more!
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Solar loans all boast the basic structure of any loan such as the terms and conditions for a home improvement loan. The average interest rate for a solar loan is anywhere between 3-8%. However, some states also provide subsidized solar energy loans that offer rock bottom interest rates.
Short-term loans have higher monthly payments but boast lower total costs during the life of the loan. Usually, you can choose from a five-year loan up to a twenty-year loan. The short-term loan usually has a lower interest rate than the longer-term loan.
You’ll encounter two types
of solar panel loans:
A secured solar loan uses your
property as collateral for the loan.
Unsecured loans are typically granted on the good standing of your credit score and positive assessment of your payment history.
Solar Loan Companies
Solar Financing Banks
Solar Financing Credit Unions
Unlike years past there are now excellent financing companies dedicated to Home Solar Financing. These companies, like Loanpal, Sunlight Financial, Mosaic, and Dividend Financing, offer fast and easy approvals for you to finance your solar system. If you have a credit score over 600, you have a great chance of being approved for a Solar Loan with payments so low that many end up saving money every month compared to their current power bill.
Few banks offer solar loans but there is an option to take out an energy efficiency mortgage to finance your solar panels. An energy efficiency mortgage requires a home energy assessment, to confirm that a solar system would increase the property’s energy efficiency.
Credit unions have energy loans available for those who qualify. These energy loans are specifically for financing solar panels and renewable energy. One great example is Community 1st Credit Union, which offers a solar financing option through its EzSolar Loan program.
Pay nothing for 18 months!Learn More
Financing Your Solar System with a Credit Card
It is possible to purchase your solar energy system with a credit card depending on your credit limit, though this isn’t always a great decision because of the high interest rates on credit cards. Unless you have a credit card with an introductory 0% APR, you will end up paying a huge amount of money in interest. Even with a 0% APR credit card, it is not always a great idea because the full amount that you charge to your card must be paid off before the deal expires.
See how much your monthly payments would be!
Home Solar Lease
A solar panel lease (referred to as a power purchase agreement or PPA) is an option for some. If you meet the following criteria, a PPA could be your best option:
- Use electricity obtained from a renewable resource.
- Avoid the added cost of maintaining and repairing the solar system.
- Do not qualify for any federal or state investment tax credits that some obtain by buying a system.
- Want to reap the benefits of solar savings immediately and not wait a year or more for a purchased solar system to start paying for itself.
- No upfront costs
We recommend purchasing your solar system.
However, if purchasing solar panels is not an option then you can explore leasing as a way to potentially save energy and reduce your carbon footprint.
(Your best estimate is fine)
Paying Cash for Solar
Solar systems, just like any large purchase, do not need to be financed through a loan or lease. If you are in a place where one upfront payment is an option, then you do not have to worry about getting approved for a Solar Loan. The downside of paying cash is that you lose the ability to spread out the cost of your system over months or years. Depending on your financial situation, paying cash upfront may not be realistic, while a low-interest solar loan may be a perfect fit. For most solar customers, this is the case.
The Property Assessed Clean Energy program is a financing option that is linked to the physical property, not to the owner of the property. This arrangement allows the owner to pay an annual payment instead of monthly payments. If you are saving money from your solar system throughout the year, then you could use the savings to pay your annual payment. This program is currently only operating in Missouri, California, and Florida, so it is not an option for most homeowners. It also takes a lien on the property, so we don’t recommend it for most homeowners.
Talk with one of our Representatives about your financing options for solar!
Solar Financing with Bad Credit
If you have a credit score of 600 or higher, there are many great options for financing your solar system. If your FICO Score or your credit score with Equifax, TransUnion, or Experian is less than 600, there are limited options for solar financing. Depending on the equity that you have in your home, some financial institutions like US Bank have home equity loans that can be used to finance your solar energy system. The alternative for homeowners with low credit scores is to pay for your solar system in one upfront payment.
If neither of these options work for you, there are good options for repairing and managing your credit including creditrepair.com and Credit Karma. For best interest rates and financing options, we recommend improving your credit status in order to qualify for a loan or lease.
The Federal Solar Tax Credit
& Financing Your Solar System
Mae and Lee - Virginia
Mae and Lee, a couple from VA saved $7,665 by taking advantage of the federal solar tax credit when they purchased their solar system in 2020
Current Solar Tax Credits
There is a federal tax credit for homeowners who choose to use solar panels to power their home. It allows you to write off 26% of the cost of your solar system from your federal income taxes. It is known as the ITC, investment tax credit.
- Own your own solar system
- Pay taxes to the federal government
There is no limit on the value of the tax credit, so you can easily save thousands. In recent years, the cost of installing solar has dropped substantially and with the ITC, it has never been more affordable or readily available. Depending on where you live, your state could also have their own tax rebates available.
Our Recommendations for
Financing Your Home Solar System
There are a number of options available for financing your solar system.
When considering all the options, with all features and benefits, we recommend financing your solar conversion with a solar loan. The reasons and benefits include:
- Low-interest rates
- No upfront costs
- Most accessible and efficient option
- Greater long-term savings than leasing
- Reduces or replaces monthly power bill
At Noble Solar, we can help walk you through the easy process for getting a solar loan. We’ve had great success helping customers switch to solar with a solar loan from Sunlight Financial and Loanpal. They both specialize in solar energy loans and make it easy to take advantage of the federal tax credit. They also have competitive interest rates, usually less than 4%, so you pay less for your solar panels and installation.
For more recommendations and information on financing your renewable solar energy system, contact us today!
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