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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.
18-year-old climate activist Sophia Kianni (middle right) wants to see the Biden administration adopt a model similar to the UN Youth Advisory Group on Climate Change, of which she is a U.S. representative. UN Youth Advisory Group on Climate Change

By Ilana Cohen

Last November, youth climate activists helped elect U.S. President Joe Biden. The Green New Deal enthusiasts turned their peers out to the polls in record numbers, with youth of color making a key difference in battleground states. Many were motivated by Biden's historically bold climate agenda—which was shaped, in no small part, by the activism and input of youth climate activists. They were also moved by a strong desire to defeat climate science denier incumbent Donald Trump.

Read More Show Less
EcoWatch Daily Newsletter
Climate change headline in flaming newspaper. RapidEye / iStock / Getty Images

By Andy Rowell

Five years ago, the leading climate denial organization in the UK, the Global Warming Policy Foundation (GWPF), published a pamphlet entitled: Carbon Dioxide, the good news.

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.

Climate activists rally to urge politicians to stand against climate denial on Jan. 9, 2017 in New York. DON EMMERT / AFP via Getty Images

The attorney general for Washington, DC filed a lawsuit on Thursday against four of the largest energy companies, claiming that the companies have spent millions upon millions of dollars to deceive customers in about the calamitous effect fossil fuel extraction and emissions is having on the climate crisis, according to The Washington Post.

Read More Show Less
Trending
Christian Aslund / EyeEm / Getty Images

By Anne-Sophie Brändlin

COVID-19 and climate change have been two of the most pressing issues in 2020.

Read More Show Less
A meteorologist monitors weather in NOAA's Center for Weather and Climate Prediction on July 2, 2013 in Riverdale, Maryland. Mark Wilson / Getty Images

The Trump White House is now set to appoint two climate deniers to the National Oceanic and Atmospheric Administration (NOAA) in one month.

Read More Show Less
An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California. David McNew / Getty Images

By Julia Conley

A new campaign unveiled this weekend by the nonprofit organization Fossil Free Media aims to expand on the goals of the fossil fuel divestment movement, cutting into oil and gas companies' profit margins through their public relations and ad campaigns.

Read More Show Less
A coke storage area is seen as steam rises from the quench towers at the US Steel Clairton Works on Jan. 21, 2020, in Clairton, Pennsylvania. White plumes of smoke billow above western Pennsylvania's rolling hills as scorching ovens bake coal, which rolls in by the trainload along the Monongahela River. BRENDAN SMIALOWSKI / AFP via Getty Images

President Trump's claim that the U.S. has the cleanest air and water in the world has been widely refuted by statistics showing harmful levels of pollution. Now, a new biannual ranking released by researchers at Yale and Columbia finds that the U.S. is nowhere near the top in environmental performance, according to The Guardian.

Read More Show Less
Trending
Patagonia's current logo. Ajay Suresh / CC BY 2.0

Eco-friendly outdoor brand Patagonia has a colorful and timely message stitched into the tags of its latest line of shorts. "VOTE THE A**HOLES," it reads.

Read More Show Less
James Murdoch, founder and CEO of Lupa Systems and editor in chief at Vanity Fair Radhika Jones speak at Wallis Annenberg Center for the Performing Arts on Oct. 23, 2019 in Beverly Hills, California. Matt Winkelmeyer / Getty Images for Vanity Fair

James Murdoch and his wife Kathryn spoke out against the climate crisis denials pushed by his father's media empire in an exclusive statement released to the Daily Beast.

Read More Show Less
Trending
A September 17 report by the Rhodium Group calculates that 1.8 billion tons more greenhouse gases will be released over the next 15 years as a result of climate change rollbacks the Trump administration has achieved so far. Pete Linforth / Pixabay / CC0

By Karen Charman

When President Donald Trump visited California on September 14 and dismissed the state Secretary of Natural Resources Wade Crowfoot's plea to recognize the role of climate change in the midst of the Golden State's worst and most dangerous recorded fire season to date, he gaslighted the tens of millions of West Coast residents suffering through the ordeal.

Read More Show Less
An oil pump is seen in Glenpool, Oklahoma. roy.luck / Wikimedia Commons / CC by 2.0

By Brett Wilkins

In a little-noticed development last week that drew ire after being reported Monday, the Trump administration's EPA granted the state of Oklahoma wide-ranging environmental regulatory control on nearly all tribal lands in the state, stripping dozens of tribes of their sovereignty over critical environmental issues.

Read More Show Less
Philadelphians participate in early voting at City Hall on Oct. 7, 2020, in Philadelphia, Pennsylvania. GABRIELLA AUDI / AFP via Getty Images

Seventy percent of U.S. voters want the government to act on the climate crisis. But if you are one of those voters, what does that actually mean when you go to fill out your ballot? How can you decide which candidates will make America green again?

Read More Show Less
EcoWatch is a community of experts publishing quality, science-based content on environmental issues, causes, and solutions for a healthier planet and life.
18-year-old climate activist Sophia Kianni (middle right) wants to see the Biden administration adopt a model similar to the UN Youth Advisory Group on Climate Change, of which she is a U.S. representative. UN Youth Advisory Group on Climate Change

By Ilana Cohen

Last November, youth climate activists helped elect U.S. President Joe Biden. The Green New Deal enthusiasts turned their peers out to the polls in record numbers, with youth of color making a key difference in battleground states. Many were motivated by Biden's historically bold climate agenda—which was shaped, in no small part, by the activism and input of youth climate activists. They were also moved by a strong desire to defeat climate science denier incumbent Donald Trump.

Read More Show Less
EcoWatch Daily Newsletter
Climate change headline in flaming newspaper. RapidEye / iStock / Getty Images

By Andy Rowell

Five years ago, the leading climate denial organization in the UK, the Global Warming Policy Foundation (GWPF), published a pamphlet entitled: Carbon Dioxide, the good news.

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.

Climate activists rally to urge politicians to stand against climate denial on Jan. 9, 2017 in New York. DON EMMERT / AFP via Getty Images

The attorney general for Washington, DC filed a lawsuit on Thursday against four of the largest energy companies, claiming that the companies have spent millions upon millions of dollars to deceive customers in about the calamitous effect fossil fuel extraction and emissions is having on the climate crisis, according to The Washington Post.

Read More Show Less
Trending
Christian Aslund / EyeEm / Getty Images

By Anne-Sophie Brändlin

COVID-19 and climate change have been two of the most pressing issues in 2020.

Read More Show Less
A meteorologist monitors weather in NOAA's Center for Weather and Climate Prediction on July 2, 2013 in Riverdale, Maryland. Mark Wilson / Getty Images

The Trump White House is now set to appoint two climate deniers to the National Oceanic and Atmospheric Administration (NOAA) in one month.

Read More Show Less
An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California. David McNew / Getty Images

By Julia Conley

A new campaign unveiled this weekend by the nonprofit organization Fossil Free Media aims to expand on the goals of the fossil fuel divestment movement, cutting into oil and gas companies' profit margins through their public relations and ad campaigns.