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Residential solar energy systems provide homeowners with a way to minimize their environmental impact and reduce their dependence on electric utilities. One of the biggest obstacles to going solar is the cost of installation, but thankfully, there are a number of solar financing options that homeowners can choose from.

In this article, we'll break down avenues for solar financing including paying in cash, taking out a loan and solar panel leasing. Read on to learn which option might be the best choice for you.

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.

Most Common Solar Financing Options to Choose From

When buying solar panels, there are generally three ways for homeowners to pay for their systems: cash, loan or lease. Here's a brief overview of these financing options:

  1. Pay in cash: The simplest way to purchase solar equipment is in cash. This way, you own the system outright and do not have to pay any kind of interest on it.
  2. Solar loan: A solar loan is similar to a home improvement loan — it's money you can borrow to cover the cost of solar panels, then pay back over an extended period of time (usually with interest).
  3. Solar lease: With a solar lease or power purchase agreement, you don't actually own the solar panels on your roof. Instead, you lease them from a solar installer and pay a fixed monthly amount to get electricity that is generated by your home's solar system.

Paying for Solar Panels in Cash

For homeowners who wish to maximize their savings, paying in cash is the optimal way to go. After all, by buying a residential solar system outright, you're essentially paying in advance for 25 to 30 years of electricity to use in your home. This means your energy rates are locked in for decades, and you don't have to worry about inflation or rising utility costs.

The big problem with paying in cash is that the upfront cost of solar equipment tends to be fairly high. Even when you take into account tax incentives and rebates, you're looking at an investment of at least $10,000 to $15,000. This isn't going to be feasible for every homeowner.

Solar Financing Through Loans

Another option is to borrow money from a solar lender, using it to finance your solar installation, then paying it back over time. The most common types of solar loans include unsecured personal loans, home equity loans or lines of credit, and in-house financing through your solar panel installation company.

If you choose a loan as your solar financing route, pay special attention to interest rates and loan terms. How much you pay in interest and your repayment period will often increase the overall cost of your renewable energy system. However, rest assured that homeowners who finance their systems with a loan are still eligible for the federal solar investment tax credit, which may make it a bit easier to pay off that loan.

Some states and local governments have low-interest loan programs for clean energy systems that homeowners can take advantage of. If you're interested in paying for a solar installation via a loan, make sure you research state or municipal programs that are available to you.

Leasing Solar Panels

Homeowners may also choose to either lease their solar panels or participate in a power purchase agreement (PPA), through which you buy the electricity the panels on your roof are producing.

Solar leases and PPAs are pretty similar, but with one significant difference: A solar lease means you're making fixed monthly payments to use solar panels and other solar equipment, whereas a PPA means you're making monthly payments simply for the electricity produced by solar panels. Naturally, the amount of electricity may fluctuate quite a bit from month to month.

Solar leases can seem attractive at first, but for most homeowners, they don't make much financial sense. One reason for this is that homeowners in PPAs or leases are not eligible for the federal solar tax credit. Another thing to note is that solar leases don't enhance your property values, which can be one of the big financial incentives of a residential solar system. Other financing options will allow you to save a lot more money in the long run.

Saving Money on Solar Power

While the initial solar investment can be steep, there are options available to homeowners who wish to save money on their solar installation.

  • Federal solar tax credit: Currently, installing a solar system qualifies you for a tax credit that's worth 26% of the total equipment and installation cost. (This number is set to decline in the coming years, so to take full advantage of it, act soon.)
  • Local utility rebates: Many municipal utility companies offer rebates to homeowners who go solar. Research your local utility providers to learn more.
  • Net metering: Also see if there is a net metering program available in your area. Net metering gives you the opportunity to funnel any surplus energy you generate back into the electrical grid, in exchange for a credit from your utility company.
  • Shopping around: Finally, remember that not all solar installers are created equal. Shop around and compare quotes to ensure you're getting the best value.

To start with a free, no-obligation quote from a top solar company near you, fill out our 30-second form below.

Which Solar Financing Option is Right for You?

Ultimately, the way you choose to pay for your solar panel system will depend on a number of factors, including your expendable income, your credit score and ability to get a good loan rate, and more.

Here's a breakdown of which type of solar panel financing may be right for which homeowners:

Solar Financing Option Who it May Be Right For
Cash payment
  • Homeowners who really want to maximize their savings
  • Homeowners who have enough tax liability to take advantage of the federal credit
  • Homeowners with enough cash liquidity to pay for their solar installation outright
Solar loan
  • Homeowners who don't have the funds to buy a solar system outright, but still want to reduce their electric bills as much as possible
  • Homeowners who want to be eligible for all rebates and tax incentives
Solar lease or PPA
  • Homeowners who don't want to deal with system maintenance
  • Homeowners who are ineligible for tax credits

Frequently Asked Questions: Solar Financing

What is the best way to finance solar?

If you have the funds, paying in cash is the most advantageous way to finance solar. For those without the funds, a solar loan is usually the best way to go. For most homeowners, leasing doesn't make as much financial sense.

Is financing available for solar?

Yes, there are plenty of ways to finance solar panels. Banks, credit unions and even some solar installers offer their own lines of credit, specifically to be used for installing solar equipment.

Is it smart to finance solar panels?

For those without the funds to buy solar equipment outright, financing solar panels can be a flexible and affordable way to lower monthly utility bills and reduce environmental impact.

Are solar loans worth it?

Taking out a solar loan delays your break-even point, but it still lets you cut your electric bills and enhance your property value. For many homeowners, solar loans are well worth it.

Can you rent solar panels?

Yes, leasing solar panels is an option. However, for most homeowners, it is not financially prudent to do so.

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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.

Up Your Skincare Game: 6 Best Vitamin C Serums

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From eating foods for healthy skin to switching up your morning and routines, taking care of the largest organ in the body can get overwhelming. Recently, vitamin C has grown in popularity in the skincare world — but do the best vitamin C serums live up to the hype?

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Adding vitamin C to your skincare routine seems like a no-brainer, but before you start shopping for a serum, it's important to be aware that vitamin C is an unstable ingredient. Dermatologists say it's important to find legit and properly formulated vitamin C serums to capitalize on the benefits of the antioxidant. In this article, we'll help you find the right dermatologist-approved vitamin C serum to add to your routine.

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According to a recent report from the Solar Energy Industries Association, Massachusetts ranks eighth in the nation for solar panel installation, with the state generating 18.49% of its total electricity from solar. The state's total investment in solar is $9.1 billion, and it is anticipated that this number is only going to grow in the next few years as more homeowners realize the astounding benefits presented by solar energy. With that thought in mind, you may be wondering: What are the top cities for solar in Massachusetts?

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As you seek to optimize the performance of your residential solar panels, there are a number of factors to consider. One thing you'll want to think about is the best direction for solar panels. The orientation of your roof in relation to the sun can have a huge impact on overall solar efficiency.

In this article, we'll outline the best direction for solar panel orientation as well as the optimal angle. We'll also explain solar tracking technology, which can ensure your panels face the sun for as long as possible each day. Read on to learn more.

Basics of Solar Panel Orientation

So, what is the best direction for solar panels? For homeowners who live in the Northern Hemisphere, the rule of thumb is that solar panels should be oriented toward true south. (For those in the Southern Hemisphere, solar panels should be oriented toward true north.) This is the best orientation because it ensures that solar panels receive direct sunlight throughout the day.

It's also worth noting that solar panels are most efficient when the sun's rays strike them perpendicularly. Again, this true south/true north orientation can be helpful, but angle also plays a large part in this parameter.

Best Direction for Solar Panels

As you consider solar panel installation, it's crucial to remember that, for the highest energy production, you'll want your panels to receive direct sunlight throughout the day. Again, for those who live in the Northern Hemisphere, this means orienting your panels toward true south, and vice versa in the Southern Hemisphere.

Note that, when we talk about true south, we're talking about geographic south, not magnetic south. In other words, you should orient your solar energy system based on the lines of longitude on a map, not by the directions on a compass.

Something else to keep in mind is that it may be beneficial to have a rotation slightly away from the best direction if you want to adjust the hours that your solar panels provide you energy (like facing them southwest to get more energy in the late afternoon as the sun is setting).

Hopefully, you have a south-facing roof that is optimally positioned for your solar panels. If the orientation of your roof isn't quite right, however, that doesn't mean solar power is off the table. There are several other options to consider, including solar carports and ground-mounted solar panels that can utilize south-facing panels for optimum electricity production.

Best Angle for Solar Panels

In addition to choosing the best direction for your solar panels, it's also helpful to select the right angle. Here, the general rule of thumb is to set the solar panel tilt angle equal to the geographical latitude. In other words, if you're at 35 degrees latitude, set your panels at a 35-degree angle.

The angle of your solar panels will help ensure the sun hits them perpendicularly, promoting the highest solar production and, thus, the highest electricity bill savings for your household.

With that said, you'll also want to consider how weather impacts solar panels. A good example of this is heavy snowfall. If you live in a part of the country where there is excessive snow accumulation, that could ultimately impede the efficacy of your solar panels. By tilting your panels at a sharper angle, you can minimize the buildup of snow or other debris.

This may all sound technical, but it's worth noting that professional solar installers will work with you to design a solar power system that works optimally; that includes recommending where to place your panels, how to angle them and more.

Solar Panel Tracking Systems

For ground-mounted panels, you might also consider installing a solar panel tracking system. Solar trackers maximize panel efficiency by rotating your panels throughout the day, allowing them to follow the movement of the sun from its rise to its set.

Just how much more efficient can a tracker make your solar panel system? One study showed that on a clear day, the average efficiency of a tracking panel was about 67%, while fixed panels only got about 40% efficiency.

As you consider solar panel tracking systems, you'll need to decide between a single-axis or a dual-axis system. Single-axis systems only move in one direction, typically north to south. A dual-axis system allows for movement along the north-south axis and the east-west axis.

Dual-axis systems take up more space, and thus are mostly used in commercial settings. They can certainly be effective, enabling your solar panels to reposition in accordance with changing seasons when the sun is higher or lower in the sky, but they typically aren't necessary for residential use.

Are Solar Panels Right for Your Home?

When deciding whether solar panels are worth it for your home, roof position should always be taken into consideration.

Most reputable solar installers offer free home consultations, during which a representative will survey your roof and let you know whether rooftop solar would be a good idea based on your roof's positioning and how much sunlight your home receives throughout the year.

To get a free, no-obligation quote and set up a consultation with a top solar company near you, fill out the 30-second form below.

FAQ: Best Direction for Solar Panels

Is east or west better for solar panels?

For most homeowners in the Northern Hemisphere, panels need to face toward the geographic south, but not necessarily toward the east or west. The north-south axis tends to be more determinative of a solar panel's efficiency.

Should solar panels face south or west?

For homeowners in the Northern Hemisphere, geographic south is typically the best direction for solar panels.

Do solar panels need to be south facing?

For homeowners who live in the Northern Hemisphere, it is recommended that solar panels be oriented toward geographic south (as opposed to magnetic south). In other words, orient your panels according to lines of longitude rather than magnetic poles.

Which is the best direction to face solar panels in Australia?

For Australian homeowners, north-facing solar panels tend to be most effective, though a professional installer can give a more specific recommendation.

EcoWatch is a community of experts publishing quality, science-based content on environmental issues, causes, and solutions for a healthier planet and life.
KangeStudio / iStock / Getty Images

Residential solar energy systems provide homeowners with a way to minimize their environmental impact and reduce their dependence on electric utilities. One of the biggest obstacles to going solar is the cost of installation, but thankfully, there are a number of solar financing options that homeowners can choose from.

In this article, we'll break down avenues for solar financing including paying in cash, taking out a loan and solar panel leasing. Read on to learn which option might be the best choice for you.

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.

Most Common Solar Financing Options to Choose From

When buying solar panels, there are generally three ways for homeowners to pay for their systems: cash, loan or lease. Here's a brief overview of these financing options:

  1. Pay in cash: The simplest way to purchase solar equipment is in cash. This way, you own the system outright and do not have to pay any kind of interest on it.
  2. Solar loan: A solar loan is similar to a home improvement loan — it's money you can borrow to cover the cost of solar panels, then pay back over an extended period of time (usually with interest).
  3. Solar lease: With a solar lease or power purchase agreement, you don't actually own the solar panels on your roof. Instead, you lease them from a solar installer and pay a fixed monthly amount to get electricity that is generated by your home's solar system.

Paying for Solar Panels in Cash

For homeowners who wish to maximize their savings, paying in cash is the optimal way to go. After all, by buying a residential solar system outright, you're essentially paying in advance for 25 to 30 years of electricity to use in your home. This means your energy rates are locked in for decades, and you don't have to worry about inflation or rising utility costs.

The big problem with paying in cash is that the upfront cost of solar equipment tends to be fairly high. Even when you take into account tax incentives and rebates, you're looking at an investment of at least $10,000 to $15,000. This isn't going to be feasible for every homeowner.

Solar Financing Through Loans

Another option is to borrow money from a solar lender, using it to finance your solar installation, then paying it back over time. The most common types of solar loans include unsecured personal loans, home equity loans or lines of credit, and in-house financing through your solar panel installation company.

If you choose a loan as your solar financing route, pay special attention to interest rates and loan terms. How much you pay in interest and your repayment period will often increase the overall cost of your renewable energy system. However, rest assured that homeowners who finance their systems with a loan are still eligible for the federal solar investment tax credit, which may make it a bit easier to pay off that loan.

Some states and local governments have low-interest loan programs for clean energy systems that homeowners can take advantage of. If you're interested in paying for a solar installation via a loan, make sure you research state or municipal programs that are available to you.

Leasing Solar Panels

Homeowners may also choose to either lease their solar panels or participate in a power purchase agreement (PPA), through which you buy the electricity the panels on your roof are producing.

Solar leases and PPAs are pretty similar, but with one significant difference: A solar lease means you're making fixed monthly payments to use solar panels and other solar equipment, whereas a PPA means you're making monthly payments simply for the electricity produced by solar panels. Naturally, the amount of electricity may fluctuate quite a bit from month to month.

Solar leases can seem attractive at first, but for most homeowners, they don't make much financial sense. One reason for this is that homeowners in PPAs or leases are not eligible for the federal solar tax credit. Another thing to note is that solar leases don't enhance your property values, which can be one of the big financial incentives of a residential solar system. Other financing options will allow you to save a lot more money in the long run.

Saving Money on Solar Power

While the initial solar investment can be steep, there are options available to homeowners who wish to save money on their solar installation.

  • Federal solar tax credit: Currently, installing a solar system qualifies you for a tax credit that's worth 26% of the total equipment and installation cost. (This number is set to decline in the coming years, so to take full advantage of it, act soon.)
  • Local utility rebates: Many municipal utility companies offer rebates to homeowners who go solar. Research your local utility providers to learn more.
  • Net metering: Also see if there is a net metering program available in your area. Net metering gives you the opportunity to funnel any surplus energy you generate back into the electrical grid, in exchange for a credit from your utility company.
  • Shopping around: Finally, remember that not all solar installers are created equal. Shop around and compare quotes to ensure you're getting the best value.

To start with a free, no-obligation quote from a top solar company near you, fill out our 30-second form below.

Which Solar Financing Option is Right for You?

Ultimately, the way you choose to pay for your solar panel system will depend on a number of factors, including your expendable income, your credit score and ability to get a good loan rate, and more.

Here's a breakdown of which type of solar panel financing may be right for which homeowners:

Solar Financing Option Who it May Be Right For
Cash payment
  • Homeowners who really want to maximize their savings
  • Homeowners who have enough tax liability to take advantage of the federal credit
  • Homeowners with enough cash liquidity to pay for their solar installation outright
Solar loan
  • Homeowners who don't have the funds to buy a solar system outright, but still want to reduce their electric bills as much as possible
  • Homeowners who want to be eligible for all rebates and tax incentives
Solar lease or PPA
  • Homeowners who don't want to deal with system maintenance
  • Homeowners who are ineligible for tax credits

Frequently Asked Questions: Solar Financing

What is the best way to finance solar?

If you have the funds, paying in cash is the most advantageous way to finance solar. For those without the funds, a solar loan is usually the best way to go. For most homeowners, leasing doesn't make as much financial sense.

Is financing available for solar?

Yes, there are plenty of ways to finance solar panels. Banks, credit unions and even some solar installers offer their own lines of credit, specifically to be used for installing solar equipment.

Is it smart to finance solar panels?

For those without the funds to buy solar equipment outright, financing solar panels can be a flexible and affordable way to lower monthly utility bills and reduce environmental impact.

Are solar loans worth it?

Taking out a solar loan delays your break-even point, but it still lets you cut your electric bills and enhance your property value. For many homeowners, solar loans are well worth it.

Can you rent solar panels?

Yes, leasing solar panels is an option. However, for most homeowners, it is not financially prudent to do so.

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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.

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