How Do Solar Loans Work?
Interested in maximizing the financial benefit of solar but don’t have the capital to pay the full cost upfront? Solar loans provide a convenient and affordable option for a customer wishing to purchase a system without paying cash. Solar loans exist in many different forms and can finance the entirety of a system’s cost. Many programs offer low monthly payments with zero money down. The energy savings provided by the solar panel system, plus the federal solar tax credit, can be used to pay back the loan on a system, plus some interest.
How do solar loans work?
Solar panel loans operate under the same structure of a typical loan for a home or car. A customer agrees to borrow an amount of money from a lender to pay for the upfront cost of the system. With the savings the panels provide, a customer can immediately begin to repay the loan. Most customers repay a solar loan within about 5-10 years (a solar panel’s warrantied lifetime is 25 years).
Solar loans come from a variety of sources including:
- Solar companies
- Credit unions
Standard solar loans allow a customer to borrow money from a typical lender, while 401K and HELOC loans (home equity line of credit) let a customer borrow money from a retirement account, or with home equity as collateral. Rates for most loan types are between 2.99%-4.99%. Any type of loan will maintain a customer’s eligibility for the federal solar tax credit (ITC) of 26%.
How do I choose the right solar loan?
Since solar loans take many different forms depending on terms, structures, and interest rate, it’s important to understand your personal goal behind taking out a loan. If you are a customer looking to keep monthly payments to a minimum, you may want to take a longer-term loan. If you are a customer looking to maximize long-term savings, it would be wise to take a short-term loan with a higher monthly payment—as you’ll pay less interest overall.
A customer’s credit, desired monthly payment, and size of a down-payment are all factors determining which loan offers the best value for a customer. Our team of expert solar professionals can assist in tailoring the best loan to suit any customer’s needs.