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EcoWatch is a community of experts publishing quality, science-based content on environmental issues, causes, and solutions for a healthier planet and life.
President-elect Joe Biden and Vice President-elect Kamala Harris salute the crowd after being declared the winners of the presidential election on Nov. 7, 2020 in Wilmington, Delaware. ANDREW HARNIK / POOL / AFP via Getty Images

Former Vice President Joe Biden defeated sitting President Donald Trump in the 2020 presidential election Saturday and is now set to become the 46th president of the United States.

Read More Show Less
EcoWatch Daily Newsletter
A woman marks down her vote on a ballot for the Democratic presidential primary election at a polling place on Super Tuesday, March 3, 2020 in Herndon, Virginia. Samuel Corum / Getty Images

By Oliver Milman

The climate crisis is set to be a significant factor in a U.S. presidential election for the first time, with new polling showing a clear majority of American voters want decisive action to deal with the threats posed by global heating.

Read More Show Less
AndreyPopov / iStock / Getty Images

Many homeowners can benefit from installing solar panels, harnessing the sun's energy to help reduce or even eliminate their dependence on traditional utilities. Although solar panels can be expensive, solar loans make residential systems more accessible to homeowners.

Indeed, if you live in an area that gets consistent year-round exposure to the sun, solar panels can be an effective way to lower your home's energy costs while minimizing your environmental footprint. The biggest obstacle to solar adoption is the initial cost of solar panels.

All in, solar panel installation costs typically range from $10,000 to $35,000. In this article, we'll explain how solar loans can make that initial investment much easier to handle.

Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.

Solar Loan Basics

So, how do solar loans work, exactly? Well, they're similar to home improvement loans, or any other type of purchase loan: They enable you to buy a residential solar system and pay it off over time.

There are plenty of solar loan options to choose from. For example, to finance solar panels, you can typically choose from any of the following:

  • An unsecured personal loan
  • A home equity loan or line of credit
  • In-house financing through your solar installation company

For the most part, the terms and conditions of solar loans mimic those of any other standard loan. Specifically:

  • Getting a lower interest rate means having a lower overall cost to borrow.
  • A shorter loan term generally means higher monthly loan payments but a lower overall cost to borrow.
  • Loans are available in a wide array of interest rates, term lengths, loan amounts, credit requirements, etc.

An important thing to note is that homeowners who finance their solar energy systems with a loan are still eligible for the federal solar tax credit. This gives you a credit worth 26% of your total solar installation costs.

How to Choose the Right Solar Loan

As you seek the best solar loan for your situation, there are a number of factors to keep in mind. These include:

  • Monthly payment amount: If you end up choosing a shorter loan term (i.e., a loan that you must pay off in a shorter amount of time), your monthly payments will probably be higher. The overall cost of the loan will be lower, but it's nevertheless important to consider the impact on your household budget.
  • Down payment amount: Depending on the loan you choose, you may or may not be required to put down a payment on the solar panels. Generally, larger down payments will mean lower interest rates and a more affordable loan overall.
  • Fees: Some solar lenders may charge prepayment penalties or monthly fees in addition to your monthly principal and interest payments. Always make sure you get fee information upfront, so as to ensure there are no surprises on your loan statement.

Secured Vs. Unsecured Solar Loans

Another important factor to consider is whether you'll get a secured solar loan or an unsecured solar loan. Here's what homeowners should know about these two options:

  • Secured loans are usually connected to some piece of collateral, such as a piece of equity in your house; this provides the lender with some protection. If you fail to make your payments, the lender can claim their piece of collateral. Because the lender has some insurance, secured loans usually offer lower interest rates and more favorable terms overall.
  • Unsecured loans do not have any collateral or security provisions for the lender. They represent a greater risk on the lender's part, and thus usually come with higher interest rates and less favorable terms.

Ultimately, the decision about which type of loan to seek comes down to this question: Do you have enough equity in your home to take out a secured loan? If so, and if you are willing to use some of that home equity to pay for solar panels, then a secured loan may be the smarter choice overall.

How to Get Low Interest Rates for Solar Loans

In addition to choosing the right type of loan, there are other steps you can take to keep your interest rates manageable when you finance a solar panel system:

  • Shop around: It's usually best not to go with the very first lender you find. Spend some time shopping around and comparing rates. Most lenders will give you a free quote that's good for a number of days while you compare offers from other companies.
  • Have someone co-sign: Having a co-signer on your solar loan — especially one with excellent credit — creates extra assurances for the lender and will usually result in more favorable rates.
  • Improve your credit score: There are several ways to improve your credit score to get a lower interest rate on a solar loan. For example, you can pay down old debts and credit card balances, be on time with monthly bill payments, and ensure you don't open any new credit cards as you apply for your solar loan.

Also be aware that there are things you can do to pay less over time other than getting a lower interest rate. Examples include choosing a shorter repayment period, looking for discounts like paperless or auto-pay discounts, avoiding loans with high fees and, if applicable, making a more substantial down payment.

Local Solar Loan Programs

Homeowners who are interested in going solar should also know about Property Assessed Clean Energy (PACE) loan programs. According to the Department of Energy, PACE programs "allow a property owner to finance the up-front cost of energy or other eligible improvements on a property and then pay the costs back over time through a voluntary assessment." What makes these programs unique is that the assessment is tied to the property itself, not to the individual.

PACE financing legislation exists in some form in 36 states plus Washington D.C. A handful of states have separate loan programs for homeowners interested in solar. Here are some current programs worth knowing about:

State Solar Loan Program Maximum
Loan Amount
Interest Rate Longest
Repayment Term
Connecticut Energy Conservation Loan Program $25,000 0% to 7% 12 years
Louisiana Home Energy Loan Program (HELP) $6,000 2% 5 years
Michigan Michigan Saves Home Energy Financing $50,000 4.44% to 7.90% 15 years
North Carolina State-regulated municipal loan options Varies Up to 8% 20 years
Ohio Energy Conservation for Ohioans
(ECO-Link) Program
$50,000 3% APR reduction
on bank loans
7 years

Additionally, certain municipalities and local utility companies may offer low-interest solar loans. We recommend researching your specific area before turning to banks or credit institutions.

Where to Get a Solar Loan

If your state doesn't have its own solar energy loan program or you're not eligible for enrollment, there are plenty of other places to get solar loans. Some of the best places to check include:

  • Credit unions
  • Lending institutions
  • In-house financing through your solar installer (which will come from a third-party solar lender)

Again, it's crucial to shop around and compare rates before deciding on which solar lender is the best fit for your needs. To get started with a free quote and find solar loan information from a top solar company in your area, you can fill out the form below.

Frequently Asked Questions: Solar Loans

Are solar loans worth it?

There are various factors to consider as you decide whether getting a solar loan is worth it. Solar loans help you increase the value of your property, lower utility bills, minimize your impact on the environment and potentially claim some tax incentives. Then again, financing does decrease your overall savings, and extends the break-even point for your residential solar system.

Do banks do solar loans?

Some banks do offer solar loans, though often with interest rates that exceed what you'd pay elsewhere. It may be worth checking with your local bank, but always remember to shop around and compare.

What is the best way to finance solar?

If you have sufficient home equity, a secured solar loan is often the most cost-effective approach. If you don't have sufficient home equity, an unsecured solar loan can work just fine.

What type of loan is a solar panel loan?

Solar panel loans are generally considered to be a type of personal loan, similar to a home improvement loan.

Can you buy a solar battery with a solar loan?

Most often the answer is yes, but make sure you double-check the terms of your loan.

A health care worker holds a test for patients suspected of being infected with coronavirus at the Center Health Vicoso Jardim on April 30, 2020 in Niteroi, Brazil. Luis Alvarenga / Getty Images

By Alexander Freund

The World Health Organization, along with its global partners in the fight against the COVID-19 pandemic, has announced that it will provide 120 million rapid-diagnostic antigen tests to people in lower- and middle-income countries over the next six months. The tests represent a "massive increase" in testing worldwide, according to the Global Fund, a partnership that works to end epidemics.

Read More Show Less
Trending
U.S. Vice President Joe Biden speaks during a White House Clean Energy Investment Summit on June 16, 2015 in the Eisenhower Executive Office Building in Washington, DC. Alex Wong / Getty Images

By Jake Johnson

With presumptive Democratic nominee Joe Biden's climate platform becoming increasingly ambitious thanks to nonstop grassroots pressure, fossil fuel executives and lobbyists are pouring money into the coffers of President Donald Trump's reelection campaign in the hopes of keeping an outspoken and dedicated ally of dirty energy in the White House.

Read More Show Less
U.S. Senator Bernie Sanders speaking with attendees at the 2019 California Democratic Party State Convention in San Francisco, California. Gage Skidmore / Flickr / CC by 2.0

By Lisa Newcomb

As wildfires burn through California and the western United States, the Gulf Coast prepares for two potential hurricanes within a 48-hour timeframe, and record high temperatures dominate the summer, Vermont Sen. Bernie Sanders on Tuesday noted the resounding absence of any mention of the climate crisis during the first night of the Republican National Convention.

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U.S. Sen. Kamala Harris (D-CA) speaks at a hearing of the Judiciary Committee on June 11, 2020 in Washington, DC. Carolyn Kaster-Pool / Getty Images

By Yvette Cabrera

This story was originally published on Grist on July 30, 2020

Fifteen years ago, Kamala Harris — San Francisco's District Attorney at the time — created an environmental justice unit in her office. The goal was to go after the perpetrators of environmental crimes that were hurting some of the city's poorest residents.

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A firefighter douses flames as they push toward homes during the Creek Fire in the Cascadel Woods area of unincorporated Madera County, California on Sept. 7, 2020. Josh Edelson / AFP / Getty Images

What does the climate crisis look like? As wildfires continue to rage up and down the U.S. West Coast, we have some terrifying answers: orange skies; burnt-out buildings; a horse, seemingly abandoned, running past a stall as the hill above erupts in flames. These images help to ground an unfathomable reality.

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Trending
Middle school teacher Brittany Myers stands in protest in front of the Hillsborough County Schools District Office on July 16 in Tampa, Florida. Octavio Jones / Getty Images

By Michael Addonizio

Safely resuming in-person instruction at U.S. public schools is important for the academic, physical, emotional and social well-being of children and their families. It's also a key factor for the nation's economic recovery.

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Since April 2020, farmer support for Trump has fallen from 89 percent to 71 percent, according to an August 2020 survey by DTN/The Progressive Farmer. Steve Smith / Getty Imagess

By Leanna First-Arai

In a push to capture the rural vote, 62 percent of which went to Trump in 2016, both the Trump and Biden campaigns are ramping up efforts to appeal to farmers and ranchers.

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Trending
President Donald Trump holds up a "Trump Digs Coal" sign at a Make America Great Again Rally in Huntington, West Virginia on August 3, 2017. SAUL LOEB / AFP / Getty Images

By Varshini Prakash and John Podesta

At the 2019 Republican Retreat, Donald Trump promised his allies that he would make this election about climate change: "I want to bring them way down the pike," he said, "before we start criticizing the Green New Deal."

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Manganese nodules on the Atlantic Ocean floor off the southeastern United States, discovered in 2019 during the Deep Sea Ventures pilot test. National Oceanographic and Atmospheric Administration

By Elizabeth M. De Santo, Elizabeth Mendenhall and Elizabeth Nyman

Mining the ocean floor for submerged minerals is a little-known, experimental industry. But soon it will take place on the deep seabed, which belongs to everyone, according to international law.

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In September 2011, the DOE issued a $90.6 million loan guarantee to finance Alamosa, a 29.3-MW high concentration photovoltaic solar generation project in Colorado. The project started commercial operations in April 2012 and created 75 construction jobs and hundreds of supply chain jobs across several states. U.S. Department of Energy

While the nation struggles to find ways to put money in peoples' pockets and to ramp up the economy so people can get back to work, over $43 billion in low-interest loans earmarked for clean energy projects sits undistributed by the Trump administration, according to The New York Times.

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EcoWatch is a community of experts publishing quality, science-based content on environmental issues, causes, and solutions for a healthier planet and life.
President-elect Joe Biden and Vice President-elect Kamala Harris salute the crowd after being declared the winners of the presidential election on Nov. 7, 2020 in Wilmington, Delaware. ANDREW HARNIK / POOL / AFP via Getty Images

Former Vice President Joe Biden defeated sitting President Donald Trump in the 2020 presidential election Saturday and is now set to become the 46th president of the United States.

Read More Show Less
EcoWatch Daily Newsletter
A woman marks down her vote on a ballot for the Democratic presidential primary election at a polling place on Super Tuesday, March 3, 2020 in Herndon, Virginia. Samuel Corum / Getty Images

By Oliver Milman

The climate crisis is set to be a significant factor in a U.S. presidential election for the first time, with new polling showing a clear majority of American voters want decisive action to deal with the threats posed by global heating.

Read More Show Less
AndreyPopov / iStock / Getty Images

Many homeowners can benefit from installing solar panels, harnessing the sun's energy to help reduce or even eliminate their dependence on traditional utilities. Although solar panels can be expensive, solar loans make residential systems more accessible to homeowners.

Indeed, if you live in an area that gets consistent year-round exposure to the sun, solar panels can be an effective way to lower your home's energy costs while minimizing your environmental footprint. The biggest obstacle to solar adoption is the initial cost of solar panels.

All in, solar panel installation costs typically range from $10,000 to $35,000. In this article, we'll explain how solar loans can make that initial investment much easier to handle.

Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.

Solar Loan Basics

So, how do solar loans work, exactly? Well, they're similar to home improvement loans, or any other type of purchase loan: They enable you to buy a residential solar system and pay it off over time.

There are plenty of solar loan options to choose from. For example, to finance solar panels, you can typically choose from any of the following:

  • An unsecured personal loan
  • A home equity loan or line of credit
  • In-house financing through your solar installation company

For the most part, the terms and conditions of solar loans mimic those of any other standard loan. Specifically:

  • Getting a lower interest rate means having a lower overall cost to borrow.
  • A shorter loan term generally means higher monthly loan payments but a lower overall cost to borrow.
  • Loans are available in a wide array of interest rates, term lengths, loan amounts, credit requirements, etc.

An important thing to note is that homeowners who finance their solar energy systems with a loan are still eligible for the federal solar tax credit. This gives you a credit worth 26% of your total solar installation costs.

How to Choose the Right Solar Loan

As you seek the best solar loan for your situation, there are a number of factors to keep in mind. These include:

  • Monthly payment amount: If you end up choosing a shorter loan term (i.e., a loan that you must pay off in a shorter amount of time), your monthly payments will probably be higher. The overall cost of the loan will be lower, but it's nevertheless important to consider the impact on your household budget.
  • Down payment amount: Depending on the loan you choose, you may or may not be required to put down a payment on the solar panels. Generally, larger down payments will mean lower interest rates and a more affordable loan overall.
  • Fees: Some solar lenders may charge prepayment penalties or monthly fees in addition to your monthly principal and interest payments. Always make sure you get fee information upfront, so as to ensure there are no surprises on your loan statement.

Secured Vs. Unsecured Solar Loans

Another important factor to consider is whether you'll get a secured solar loan or an unsecured solar loan. Here's what homeowners should know about these two options:

  • Secured loans are usually connected to some piece of collateral, such as a piece of equity in your house; this provides the lender with some protection. If you fail to make your payments, the lender can claim their piece of collateral. Because the lender has some insurance, secured loans usually offer lower interest rates and more favorable terms overall.
  • Unsecured loans do not have any collateral or security provisions for the lender. They represent a greater risk on the lender's part, and thus usually come with higher interest rates and less favorable terms.

Ultimately, the decision about which type of loan to seek comes down to this question: Do you have enough equity in your home to take out a secured loan? If so, and if you are willing to use some of that home equity to pay for solar panels, then a secured loan may be the smarter choice overall.

How to Get Low Interest Rates for Solar Loans

In addition to choosing the right type of loan, there are other steps you can take to keep your interest rates manageable when you finance a solar panel system:

  • Shop around: It's usually best not to go with the very first lender you find. Spend some time shopping around and comparing rates. Most lenders will give you a free quote that's good for a number of days while you compare offers from other companies.
  • Have someone co-sign: Having a co-signer on your solar loan — especially one with excellent credit — creates extra assurances for the lender and will usually result in more favorable rates.
  • Improve your credit score: There are several ways to improve your credit score to get a lower interest rate on a solar loan. For example, you can pay down old debts and credit card balances, be on time with monthly bill payments, and ensure you don't open any new credit cards as you apply for your solar loan.

Also be aware that there are things you can do to pay less over time other than getting a lower interest rate. Examples include choosing a shorter repayment period, looking for discounts like paperless or auto-pay discounts, avoiding loans with high fees and, if applicable, making a more substantial down payment.

Local Solar Loan Programs

Homeowners who are interested in going solar should also know about Property Assessed Clean Energy (PACE) loan programs. According to the Department of Energy, PACE programs "allow a property owner to finance the up-front cost of energy or other eligible improvements on a property and then pay the costs back over time through a voluntary assessment." What makes these programs unique is that the assessment is tied to the property itself, not to the individual.

PACE financing legislation exists in some form in 36 states plus Washington D.C. A handful of states have separate loan programs for homeowners interested in solar. Here are some current programs worth knowing about:

State Solar Loan Program Maximum
Loan Amount
Interest Rate Longest
Repayment Term
Connecticut Energy Conservation Loan Program $25,000 0% to 7% 12 years
Louisiana Home Energy Loan Program (HELP) $6,000 2% 5 years
Michigan Michigan Saves Home Energy Financing $50,000 4.44% to 7.90% 15 years
North Carolina State-regulated municipal loan options Varies Up to 8% 20 years
Ohio Energy Conservation for Ohioans
(ECO-Link) Program
$50,000 3% APR reduction
on bank loans
7 years

Additionally, certain municipalities and local utility companies may offer low-interest solar loans. We recommend researching your specific area before turning to banks or credit institutions.

Where to Get a Solar Loan

If your state doesn't have its own solar energy loan program or you're not eligible for enrollment, there are plenty of other places to get solar loans. Some of the best places to check include:

  • Credit unions
  • Lending institutions
  • In-house financing through your solar installer (which will come from a third-party solar lender)

Again, it's crucial to shop around and compare rates before deciding on which solar lender is the best fit for your needs. To get started with a free quote and find solar loan information from a top solar company in your area, you can fill out the form below.

Frequently Asked Questions: Solar Loans

Are solar loans worth it?

There are various factors to consider as you decide whether getting a solar loan is worth it. Solar loans help you increase the value of your property, lower utility bills, minimize your impact on the environment and potentially claim some tax incentives. Then again, financing does decrease your overall savings, and extends the break-even point for your residential solar system.

Do banks do solar loans?

Some banks do offer solar loans, though often with interest rates that exceed what you'd pay elsewhere. It may be worth checking with your local bank, but always remember to shop around and compare.

What is the best way to finance solar?

If you have sufficient home equity, a secured solar loan is often the most cost-effective approach. If you don't have sufficient home equity, an unsecured solar loan can work just fine.

What type of loan is a solar panel loan?

Solar panel loans are generally considered to be a type of personal loan, similar to a home improvement loan.

Can you buy a solar battery with a solar loan?

Most often the answer is yes, but make sure you double-check the terms of your loan.

A health care worker holds a test for patients suspected of being infected with coronavirus at the Center Health Vicoso Jardim on April 30, 2020 in Niteroi, Brazil. Luis Alvarenga / Getty Images

By Alexander Freund

The World Health Organization, along with its global partners in the fight against the COVID-19 pandemic, has announced that it will provide 120 million rapid-diagnostic antigen tests to people in lower- and middle-income countries over the next six months. The tests represent a "massive increase" in testing worldwide, according to the Global Fund, a partnership that works to end epidemics.

Read More Show Less
Trending
U.S. Vice President Joe Biden speaks during a White House Clean Energy Investment Summit on June 16, 2015 in the Eisenhower Executive Office Building in Washington, DC. Alex Wong / Getty Images

By Jake Johnson

With presumptive Democratic nominee Joe Biden's climate platform becoming increasingly ambitious thanks to nonstop grassroots pressure, fossil fuel executives and lobbyists are pouring money into the coffers of President Donald Trump's reelection campaign in the hopes of keeping an outspoken and dedicated ally of dirty energy in the White House.

Read More Show Less