5 Ways to Pay for Your Solar Power Installation

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

solar loans

In 2014, my husband and I got tired of sky-high electric bills and installed solar panels. We successfully slashed our electric bill, but with a price tag of more than $20,000, the installation costs were expensive.

Fortunately, solar power often pays homeowners back over time because of lower electric bills and increased property values. Federal tax credits and state-sponsored incentives can also provide more savings.

Still, finding a way to pay for solar installations is a challenge for many.

But there are options for financing this investment, including solar loans, personal loans, or home equity loans. The right choice depends on your situation, so read on to compare your options.

1. Solar loans

Solar loans provide money to pay your installer for your solar energy system. You’ll pay this money back to the lender over time. When you own your solar panels, you can claim the tax credits and incentives for which you’re eligible. (Check out what solar programs your state offers.)

When my husband and I spoke with solar installation companies, each had preferred lenders they worked with to offer financing. The loans were unsecured, which means no collateral was required.

You can typically borrow up to the entire cost of the solar energy system, including panels and installation. Loan terms vary, with different interest rates and repayment programs.

Working with a lender your installer recommends is convenient. But this isn’t always the most cost-efficient choice since other lenders might offer loans with more favorable terms.

It’s common to find loans with $0 down payments and reasonable fixed interest rates to keep payments low, but options vary by location.

EnergySage has a list of solar lenders that you can sort by state to find the best deals in your area. Remember that the loan still needs to be repaid even if you move and no longer benefit from the installation.

2. Personal loans

While you can find loans for solar installation projects, there’s no reason you must get a specific solar loan.

Instead, personal loans can be used for almost any purpose, including paying for solar energy systems. They are offered by many financial institutions, including national and local banks, online personal loan lenders, and credit unions.

By shopping for personal loans instead of solar-specific loans, you’ll be able to access more financing options.

There’s another bonus, too. Many solar installers — including the installer I used — offer a discount if you pay in cash. When you arrange a personal loan yourself instead of getting a solar loan through the installer, you can use that money to qualify for the cash discount.

After you pay for a solar installation with a personal loan, you can even use tax credits or incentives that you receive from the government to pay down your loan balance ahead of schedule, reducing your loan costs over time.

3. Home equity loans

Home equity loans are another option to fund a solar installation. If you have equity in your home, you can use a home equity loan or a home equity line of credit to cover the costs of a solar installation.

A home equity loan allows you to withdraw a set amount of equity once, while a home equity line of credit sets a maximum limit you can borrow and use as needed.

Borrowing against your home can be a good way to pay for solar power because, according to the IRS, you can deduct interest as long as the money is used to buy, build, or substantially improve your home.

But your home is at risk if you can’t repay the loan. If you default on your debt, the bank could foreclose on your house. Also, if you’ve taken equity out of your home and your house is now worth less than what you owe, you might be unable to sell without making up the difference.

4. PACE financing

The Property Assessed Clean Energy (PACE) program provides another useful option for funding solar panels.

PACE funding is made available though lender partnerships with local governments. This funding allows qualifying property owners to borrow for energy-efficient home improvements, including solar panels.

Guidelines vary by location, but approval for PACE loans isn’t based on your credit. Instead, the amount you qualify for is based on your property.

Also, the amount you borrow is paid back through property taxes over a period as long as 20 years. Payments due on the money you borrow are simply added to your annual property tax assessment.

There’s no down payment required, and homeowners might not need to begin paying for several months. If you sell your house before you completely pay off the project, the loan would transfer to the new owner.

While PACE loans are right for some, the Los Angeles Times warned last year that some homeowners accept PACE funding without understanding terms. Because the loans are secured by your property, your home could be at risk if you don’t pay.

5. Solar leases

Some homeowners also opt to lease solar panels. While monthly payments can be lower than the cost of a loan and panel maintenance is usually included, you won’t own the panels.

This means you won’t be eligible for valuable tax breaks or incentives. Plus, if you move, you’ll have to find a buyer who is willing to take on the lease payments and eligible to do so. This can make selling your home more difficult.

Should you invest in solar?

Because solar is an expensive investment, it’s important to consider the pros and cons as you shop for the most affordable financing. This means you should consider:

  • Interest rates: How much will it cost you to borrow the money?
  • Monthly payments: Will the payments be affordable on your current budget?
  • Loan repayment period: How long do you have to repay what you’ve borrowed?
  • Loan limits: Is there a maximum you’re allowed to borrow? Will you be able to borrow enough to cover the costs of your solar energy system?
  • Prepayment penalties: If you want to repay the loan early, do you have the option to do so?
  • Qualifying requirements: Are you eligible for the loan based on your credit score and income?

You should also calculate your payback period — that is, how long it will take to save enough in lower electric bills to make up for your initial investment. A solar payback calculator can simplify this. Simply input your property address and average monthly electric bill to see your potential savings.

For my husband and I, investing in solar was a great choice, but your situation might be different. Consider your options carefully, including your choices for financing, before going forward.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 6.325% APR to 15.615% APR (with AutoPay). Variable rates from 6.275% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of July 3, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.275% APR assumes current 1-month LIBOR rate of 2.10% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  1. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  2. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  1. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  2. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.73% – 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
6.28% – 15.62%1$5,000 - $100,000
Check rate nowon SLH's secure site
6.87% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
4.99% – 29.99%$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%2$5,000 - $50,000Visit Citizens
15.49% – 34.49%$2,000 - $25,000Visit LendingPoint
5.99% – 35.89%$1,000 - $40,000Visit LendingClub
5.49% – 18.24%$5,000 - $75,000Visit Earnest
9.95% – 35.99%$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.