Solar Financing
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Explore Best Financing Options with Solar SME
At over $10,000 or more, a solar installation is a big investment. If you want to go solar but don’t want to buy a solar PV system, Solar SME can assist you with solar PV financing. We can help you understand and make a smart decision. These options include $0-down solar energy loans, PPA (Power Purchase Agreements), and leases.
Solar Loans
Loans for solar panels are a great choice to finance a solar system if you want to purchase it. Most solar energy loans, secured or unsecured, will fund the entire cost of your system. You can borrow such loans through a bank, local entity, or, in some cases, from the federal government. Solar loans can also be part of a home improvement loan and can be rolled into a refinanced mortgage. Since solar systems are known to increase property value and a solar system that was financed through a solar loan will add value to the home at the time of resale. Since it’s not owned by a third party under a PPA or lease, it makes it easier to sell and for a new buyer to purchase.
Points to Consider for Solar Loans
- Using a solar loan to finance your panels can help you save 40% to 70% compared to what you would have paid for electricity over the lifetime of your system.
- Solar loans use the same general framework, terms, and conditions as most other home improvement loans. Some states and counties also offer subsidized solar energy loans with interest rates below the cost of other home improvement loans.
- By financing a solar system with a loan, you are considered the owner, qualifying you to experience the full benefits of financial incentives such as the Federal Investment Tax Credit (ITC). Interest paid on solar loans can also be tax-deductible, which reduces your income tax.
Solar Leases and PPAs
Points to Consider for Solar Lease and PPAs
- With a lease or PPA, the third-party owner (TPO) will install and own solar panels on your property. In return, you agree to pay them for the use of solar energy for the duration of the agreement.
- Selecting a PPA or lease as a solar panel financing option can help you save 10% to 30% on your electricity bills with no upfront investment needed from you.
- The TPO is responsible for the maintenance of solar panels. At the end of the contract they will either uninstall them or sell the system to you at the fair market value of the system at the end of the contract, like leasing a car.
- Since the TPO owns the solar panel system, it receives the benefit of the incentives offered by the government, the state, and any local utilities and shares those savings with you.
Pros and Cons of PPA Solar Power Financing Options
Pros
- No initial investment, making solar accessible for most homeowners.
- Providers handle maintenance and repairs, relieving the burden from the homeowner.
- Lower electricity bills from day one, reducing costs.
- Assurance of optimal system efficiency and energy production.
- Adjustable contracts provide purchasing options.
Cons
- Long-term commitment. Contracts often span 15-25 years, limiting flexibility.
- No direct tax incentives or ownership advantages for homeowners.
- Price increases built into the contract may impact long-term savings.
- Specific location requirements may limit installation possibilities.
- The homeowner is vulnerable to a renegotiated agreement or loss of maintenance if the TPO goes out of business.
What is the Best Way to Pay for Going Solar?
The best way to fund your solar systems depends on your budget.
- If you have a great credit score and/or cash in hand, it might be cheaper overall than financing options. Paying for it upfront or financing it with a solar loan gives you ownership and allows you to take advantage of all the incentives, like the 30% Investment Tax Credit and local rebates.
- The best advice is to speak with a well-reputed local solar installer who may guide you on how much the different residential solar financing options will cost you and choose the best financing option.
Solar SME Solar Financial Services
Looking for Financial Services in your area? Solar SME offers customized solar and backup options to businesses for reducing grid reliance. Also, we help you with flexible solar financing options and leading warranties for your solar investment.
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Frequently Asked Questions
Combo loans and re amortizing loans are the two types of loans that are specifically made to finance solar panels. In general, you need to have a minimum FICO credit score of 650, a debt-to-income ratio of less than 50%, and the primary borrower’s name on the home’s title in order to be eligible for a solar loan.
Finance a solar system has several advantages. In the first place, it enables households who lack the funds to buy a system outright to go solar and begin saving money on energy bills. Second, solar panel financing enables you to take advantage of a zero-down loan to start saving money on energy bills. A solar loan’s monthly payments are usually less than the typical electricity bill.
Installing a solar system at home is a smart long-term investment, and buying rather than leasing is typically the better option. There are relatively few circumstances when leasing solar panels will be more cost-effective than purchasing them outright or obtaining a solar loan.
Secured solar loans require you to offer an asset, typically your home, as security for the loan. This is the primary distinction between secured and unsecured solar loans. Although unsecured solar loans don’t need an asset, they typically have higher interest rates to compensate for the lender’s increased risk. You can compare secured and unsecured loan to determine which financing option is best.
When you buy your system with cash, you pay the entire amount up front and don’t have to pay for it again. If you decide to take out a solar loan, it’s like financing a car or paying off your mortgage: you’ll have to make fixed monthly payments for the duration of the loan, which is typically five to twenty-five years.
There are four primary methods of financing your solar panel system: cash purchase, loan, solar leasing, or power purchase agreement (PPA).
Local and national banks, manufacturers, credit unions, and specialty financing firms are organizations that provide solar loans. Comparing offers from several finance companies will help you select the best solar loan. For better long-term savings, especially if you pay off your loan early (which is what most homeowners do), look for ones with low upfront fees, even if that implies higher interest rates.
