Solar Panel Financing In 2022 (Homeowner's Savings Guide)

In this EcoWatch guide on solar panel financing, you’ll learn:

  • How to take advantage of low interest programs like PACE
  • What the main solar financing options are
  • When does it make sense to pay for your solar panels in cash
  • Which solar financing option is best for you

This guide has helped thousands of homeowners save money when going solar by helping them find the best financing option for their home. Let’s get started!

Ecowatch Author Josh Hurst

By Josh Hurst

Updated 6/27/2022

Why You Can Trust EcoWatch

We work with a panel of solar experts to create unbiased reviews that empower you to make the right choice for your home. No other site has covered renewables as long as us, which means we have more data and insider information than other sites.

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.

Jump to Section:

  1. What Are the 3 Most Common Solar Financing Options?
  2. Which Solar Financing Option Is Right for You?
  3. How Can You Save Money When Going Solar?
  4. FAQs: Financing Solar Panels

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.

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What Are the 3 Most Common Solar Panel Financing Options?

When buying solar panels, there are generally three ways for homeowners to pay for their systems from a solar company: cash, loan or lease.

solar panel financing

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 power system outright, you’re essentially paying in advance for 25 to 30 years of electricity to use in your home.

This means your home 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 system cost of solar power equipment tends to be fairly high.

Even when you take into account incentives like federal tax credits 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 Panel 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 home equity lines of credit), home improvement loans, and in-house financing through your solar panel installation company.

If you choose a loan as your solar financing route, pay special attention to your annual percentage rate (APR), origination fees and loan terms. How much you pay in interest, fees, 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 government’s solar investment tax credit (ITC), which may make it a bit easier to pay off that loan. Some states and local governments have low-interest rate loan programs for clean energy systems that you can take advantage of, such as Property Assessed Clean Energy (PACE) loans.

Borrowers sometimes have solar programs as well, like Fannie Mae’s HomeStyle® Energy mortgage. If you’re interested in paying for a solar installation via a loan, make sure you research all low-interest financing options available to you.

Watch Below: The below video quickly explains what you should look for in a solar panel loan and how to find the best deal for your needs.

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.

Click below to get started with a quote from one of our preferred partners.


Read Also: Paying For Solar – Tips For Financing a Residential System

Which Solar Panel 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 monthly 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 not ready to commit to a system of their own
  • Homeowners who are ineligible for tax credits

Read Also: Green Power Markets financing

How Can You Save Money When Going Solar?

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

solar panel financing guide

  • 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 (such as a property tax exemption) 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.

Click below to get started with a quote from one of our preferred partners.


Read Also: The Federal Trade Commission’s (FTC) Consumer Advice on Solar Financing

FAQs: Financing Solar Panels

Below are a few questions EcoWatch readers regularly send in about financing their solar panels. If you have anymore, do not hesitate to contact us!