Solar loans: Financing for solar energy and solar panels

Solar loans: Financing for solar energy and solar panels

Help save the earth and save money with solar energy.

While you may not be able to commit to an entire solar roof from Tesla, solar panels could still be a great investment. The world is slowly moving towards renewable energy, and there are incredible benefits to supporting that move — both financially and environmentally. We’ll show you what to look for in solar panel financing options and what you might expect to pay to go green in a big way.

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    How can I finance solar panels?

    Solar projects are typically funded one of several ways, depending on what you’re looking to get out of your new energy source. But these can be chunked into two categories: leasing and buying.

    Leasing solar panels means that you never actually own the equipment, but you may not have to put any money down for it or maintain it. Buying the system generally requires that you put down money upfront, but you are also afforded flexibility when it comes to what you’re buying and what happens if you sell your home.

    To buy a solar panel system outright, you’ll likely need financing. Luckily, there are other options.

    PACE Government Financing

    Your state or local government may offer residential Property Assessed Clean Energy (R-PACE) financing in your area. R-PACE financing is an opt-in program that allows homeowners to participate in an upgrade of their property via tax-assessment. In short, the cost of the improvement is paid via an increase in property tax over an extended period — usually between 10 and 20 years.

    The improvements made to a house under the R-PACE program stay with the house — which is to say if you move, the solar panel system that was installed won’t be moving with you. It also means the debt won’t necessarily move with you either, as it’s a debt of the property and not the owner.

    Title I home improvement loan

    Also known as a “no-equity home loan” this type of financing is done through the federal government. You might like this options because you don’t need to have home equity built up and it comes with competitive fixed interest rates. You might not like this option is you want to borrow more than $25,000 or want to get your loan quickly. Title I home improvement loans could take around one to two months to process.

    Home equity loan

    A loan that’s backed by the amount that you own your home. In other words: What you’ve paid off so far on your mortgage is used as collateral. This is a viable option because you could possibly borrow 80% to 90% of your home’s value. The downside if you must have that equity built up beforehand.

    Personal loan

    A general purpose personal loan can be an effective option here if you have the credit history to back them up. Solar panels can be pricey, and personal loan rates and terms may not cut it unless you have excellent credit. Be sure to consider the offer’s monthly payments against what you’re able to afford in addition to your other expenses.

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    Rates last updated March 25th, 2018

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    Name Product Product Description Min. Credit Score Max. Loan Amount APR
    Even Financial Personal Loans
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    4.99%–35.99% (fixed)
    LendingClub Personal Loan
    A peer-to-peer lender offering fair rates based on your credit score.
    5.99%–35.89% (fixed)
    CompareFirst Personal Loans
    An easy-to-use loan connection service geared toward introducing first-time borrowers to affordable personal loans.
    2.99%–36% (fixed)
    Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.
    5.99%–35.99% (fixed)
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    Affordable loans with two simple repayment terms and no prepayment penalties.
    5.96%–35.97% (fixed)
    Best Egg Personal Loans
    5.99%–29.99% (fixed)
    FreedomPlus Personal Loans
    Consolidate debt and more with these low-interest loans. Cosigners welcome.
    4.99%–29.99% (fixed)
    Laurel Road Personal Loans
    Get a personal loan with no application or origination fees and a rate discount for autopay.
    5.5%–11.74% (fixed)
    LendingPoint Personal Loans
    Get a personal loan with reasonable rates even if you have a fair credit score in the 600s.
    15.49%–34.99% (fixed)
    Monevo Personal Loans
    Quickly compare multiple online lenders with competitive rates depending on your credit score.
    3.09%–35.99% (fixed)
    NetCredit Personal Loan
    Check eligibility in minutes and get a personalized quote without affecting your credit score.
    34%–155% (fixed)

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    How much does a solar energy project cost?

    Your cost will vary based on the company you purchase through, your location, the size of the system that you get, and the overall cost changes based on your loan’s interest rate. On average a complete residential system can cost from $25,000 to $35,000 with installation. This doesn’t factor in tax credit savings, or what you could save with your new solar panels generating some or all of your electricity.

    • Installation costs run between $5,900 and $36,000 based on the size of your system and your location.
    • Panel costs vary based on type and range from $0.70 to $1.50 per watt.
    • Labor costs average at $0.50 per watt, for full systems that ranges from $1,000 to $5,000.
    • A DIY system costs between $4,000 and $27,000 based on the size of the system.
    • Mount costs run from $10 per unit up to $3,000 depending on if you choose a fixed, adjustable or tracking fixture.

    Average cost for a 6 kW system after federal tax credit:

    RegionAverage cost

    How you can get a return on your investment in solar panels

    1. Find out how well your house is suited for solar energy. Climate, roof pitch and facing will make a difference in how efficient your system is.
    2. Research the companies that you’re thinking of buying from thoroughly. Ask if installation is done in house, look at reviews from other customers and find out if there’s any kind of warranty ahead of time.
    3. Maintain your panels properly. Follow the manufacturer’s recommendations for cleaning and maintenance. It’s difficult to get a return on a solar energy system when it’s not producing energy. Some companies include a maintenance plan with their products, while others will cost you out of pocket. Without a warranty you’re looking at about $80 annually for a solar panel system that lasts 25 years.
    4. Consider the value it may add to your property. More people are looking to invest in renewable energy and cut their electricity costs, which leads to buyers who will pay more for homes that are already equipped with solar technology.

    Potential savings with a solar energy system

    Here’s a look at the projected annual savings for a 5 kW system over selected states in different regions.

    StateEstimated annual savings on electricity

    Solar energy system tax credits

    The federal solar tax credit or investment tax credit (ITC) is 30% of the cost of installing a solar energy system through 2019. Past 2019, the ITC drops to 26% in 2020, 22% in 2021 and finally 10% from 2022 onwards.

    States offer several types of incentives including: performance-based incentives (PBIs), solar renewable energy certificates (SRECs), state tax credits and cash rebates.

    Some examples of state tax credits include:

    • Arizona has a 25% tax credit with a maximum of $1,000 per residence.
    • Oregon is a bit different and has an incentive of $0.60 per kWh (kilowatt hour) saved and $2.00 per kWh saved incentive for space heating or cooling and hot water heating, respectively, with a maximum incentive of $1,500 per year.
    • New York offers a 25% tax credit with a maximum of $5,000. Systems must be under 25 kW to qualify with the exception of 50 kW systems owned by condos or cooperative housing associations.
    • Massachusetts supplies a 15% tax credit with a $1,000 maximum per residence for solar water and space heat and for solar photovolatics.

    Bottom line

    Solar power can be a great investment for your home and for the environment. Tax credits, reducing your reliance on the utility and potentially selling back to it can all lessen the financial burden if you’re able to make the initial plunge.

    Your best funding option will depend on what you want out of your new system, how much equity you have in your home and how long you want to repay the loan. Carefully consider your needs and compare your loan options before committing.

    Frequently asked questions

    Rhys Subitch

    Rhys Subitch is a content creator and editor for They specialize in updating information on various pages to keep everything accurate for the readers, and enjoy the time they get to spend researching various topics because of it. Rhys lives with their cat and partner in Seattle. When not working they enjoy working on sewing and other craft projects.

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