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A Comprehensive Guide to Solar Panel Financing Options

Solar panel financing is a good way to move towards solar energy for your home. Here’s everything you need to know from SmartSolar.org
Solar Panels
5 minutes
Written by:
Joey Cheek
Updated on:
January 13, 2023

Solar panel financing helps make access to solar energy possible for many people. It is possible to finance solar panels, meaning you can take out a solar panel loan to help cover the cost of purchasing a solar panel system. Before doing this, it’s a good idea to understand what type of solar panel is best for your home as well as how a federal solar tax credit could help to make the purchase more affordable. SmartSolar can offer the guidance and support you need to get the best price for your solar panels. Contact us now to learn more.

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The Bottom Line:

  • What are the options for solar panel financing? - In-house financing, home equity loans, cash-out refinancing, and power purchase agreements are all options for solar panel financing
  • How to choose the best solar panel purchase option - Consider the required monthly payment, downpayment, fees, and interest rates before choosing your solar panel purchase option
  • Are you ready to finance solar panels? - Solar leases are a great alternative for those who want to avoid the upfront cost of solar installation and instead want to rent solar panels. 

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What Are the Options for Solar Panel Financing?

Investing in solar equipment can be expensive. First, there are a few good things to consider. The U.S. Department of Energy reports that, since 2014, the cost of solar PV panels has fallen by as much as 70%. So how much do solar energy systems cost? The average cost, according to the U.S. Energy Information Administration, was $1497 per kilowatt of power in 2019.

The average cost of solar equipment in the U.S. can range from $17,000 up to $33,000, and sometimes higher. The cost is based on the type of solar panels installed, the overall size of the home, and the energy needs of the property. That could be worrisome – how can you pay for these costs?

Solar loans can help you. There are several routes to obtaining solar panel loans. Take a closer look at these options for paying for solar, including solar financing solutions.

In-House financing

You might want to get a loan from the company that is installing your solar panels. Some companies offer in-house lending, which means they will work with you to cover the cost of the solar equipment through a loan financed through an in-house lender. In some situations, they may have partners that offer personal loans or no equity loans, such as an unsecured personal loan, to help you pay for the solar power system. This is one way to get the solar system you need quickly.

Home equity loan

Some people may be able to tap into home equity loans. These loans are based on the amount of equity in your home. If you choose a solar system for your home, you could get a home equity loan to help pay for the equipment. Home equity loans are typically based on your primary or secondary residence’s value.

Home equity line of credit

A home equity line of credit, which is also based on the amount of equity you have in your home, is another route to consider. In this option, you can finance solar through a line of credit that you may be able to tap into more than once. It has less risk overall to the borrower and may offer low-interest rates.

Cash-out refinance

In some situations, you may wish to consider cash-out refinancing. In this situation, you get a quote from the solar panel installation company for the amount you need and then refinance your existing home loan. To obtain this type of loan, you have to have equity in your home.

Power purchase agreement (PPA) or leasing

Some solar companies offer an alternative to purchasing through a loan. A solar lease or power purchase agreement could be another option. In this situation, you are not financing solar panels but instead leasing them from the solar company. You do not own them, which also means that you cannot receive the tax credit for them. Instead, you can use the panels on your home to get renewable energy and often save a lot of money on your energy bill.

How to Choose the Best Solar Panel Purchase Option

Every situation is a bit different, but it is always wise to consider a few factors in any loan financing option before making a buying decision. Here are some factors to keep in mind:

Credit score: Many lenders have a minimum credit score you need to meet to qualify for the loan. This may apply to all unsecured loan options as well as home equity loans. Each lender sets its own requirements for credit scores. The higher your score, the lower your interest rate.

Monthly payment: Be sure to consider what the monthly payment for the loan will be. If the monthly payments are too high and may make it hard for you to maintain those payments, that may not be ideal.

Down payment: In some cases, to finance solar panels, you may need to have a down payment or a certain amount you will pay upfront to cover the cost of having a company install solar panels.

Fees: There is a wide range of fees you may pay during this process based on the financing options you choose, including an origination fee, appraisal fees, credit history report fees, and much more.

Interest rates: The lower the interest rate, the more affordable it will be. Fixed interest rates tend to keep your monthly payment lower and more consistent.

In addition to these factors, also consider whether or not you qualify for solar tax incentives. The largest of these is the tax credit available from the federal government, which can often provide you with significant savings when installing solar panels. The federal tax credit, as well as any available state tax credits, could help lower how much you have to finance to buy a solar energy system.

Are you ready to finance solar panels?

A solar panel loan could be the right option for you, though solar leases are an alternative for those who want to avoid the upfront cost of solar installation and instead want to rent solar panels. No matter what you want to do with solar financing, you must always get loan approval for the cost of the solar panels. This depends on what lenders are willing to offer.

To learn more about the energy savings, tax credits, and solar installation process, contact SmartSolar today. We’re here to help you.

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Joey Cheek

Meet the author:

Joey Cheek

Joey Cheek spent 10 years on the US National Speedskating Team where he competed in two Olympic Games, winning gold, silver, and bronze medals. He attended Princeton before diving into the startup and tech world. In 2011 he launched a livestreaming platform for sports before leading a team of engineers building next-gen news and content apps for Fortune 100 companies. He is the CEO and co-founder of SmartSolar.org, whose mission is to move the earth to cheap, abundant, carbon-free energy.

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