Solar financing: how to pay for solar panels? (2021)

Residential solar power systems offer homeowners a way to minimize their environmental impact and reduce their dependence on electric utilities. One of the biggest hurdles in switching to solar power is the cost of installation, but luckily there are a number of solar financing options that homeowners can choose from.

In this article, we’ll go into detail about solar financing options, including paying in cash, taking out a loan, and renting solar panels. Read on to find out which option might be the best choice for you.

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

Most common solar financing options to choose from

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

  1. Pay in cash: The easiest way to buy solar equipment is with cash. This way you own the system and don’t have to pay 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, and then pay it back over a long period of time (usually with interest).
  3. Solar lease: With a solar rental or power purchase agreement, you don’t actually own the solar panels on your roof. Instead, you rent them from a solar installer and pay a fixed monthly amount to get the electricity produced by your home’s solar system.

Pay for solar panels in cash

For homeowners who want to maximize their savings, cash payment is the best solution. After all, by purchasing a residential solar system directly, you are essentially paying up front for 25 to 30 years of electricity to use in your home. This means your energy rates are stuck 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 initial cost of the solar equipment tends to be quite high. Even taking into account the tax incentives and discounts, you are considering an investment of at least $ 10,000 to $ 15,000. This will not be possible for all owners.

Solar financing through loans

Another option is to borrow money from a solar lender, using it to finance your solar installation, and 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 internal financing through your solar panel installation company.

If you choose a loan as your solar financing route, pay close attention to interest rates and loan terms. The amount 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 repaying this loan a bit easier.

Some states and local governments have low interest loan programs for clean energy systems that homeowners can take advantage of. If you want to pay for a solar installation through a loan, be sure to research any state or municipal programs that are available to you.

Solar panel rental

Homeowners can also choose to rent their solar panels or participate in a Power Purchase Agreement (PPA), whereby you purchase the electricity produced by your roof panels.

Solar leases and PPAs are quite similar, but with one significant difference: a solar lease means you make fixed monthly payments to use solar panels and other solar equipment, while a PPA means you make payments. monthly simply for electricity produced by solar panels. Of course, the amount of electricity can vary considerably from month to month.

Solar leases may seem attractive at first, but for most homeowners, they don’t make a lot of financial sense. One of the reasons for this is that owners of PPAs or leases are not eligible for the federal solar energy tax credit. Another thing to note is that solar leases do not increase the value of your property, which can be one of the main financial incentives of a residential solar system. Other financing options will save you a lot more money in the long run.

Save money on solar power

While the initial solar investment can be high, there are options for homeowners who want to save money on their solar installation.

  • Federal Solar Tax Credit: Currently, installing a solar system entitles you to a tax credit representing 26% of the total cost of equipment and installation. (This number is expected to decrease in the coming years, so to take full advantage of it, act fast.)
  • Local utility discounts: Many municipal utility companies offer discounts to homeowners who opt for solar power. Find out more about your local utility providers.
  • Net billing: Also check if there is a net metering program available in your area. Net metering gives you the ability to feed the excess energy you generate back into the power grid, in exchange for credit from your power company.
  • Shop: Finally, remember that not all solar installers are created equal. Shop around and compare quotes to make sure you get the best value for your money.

To get started with a free, no-obligation quote from a large solar company near you, complete our 30-second form below.

Which solar financing option is right for you?

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

Here is a breakdown of the type of solar panel financing that may be suitable for which owner:

Solar financing option

Who can this be good for

Cash payment

  • Homeowners who really want to maximize their savings
  • Homeowners who have enough taxes to pay to take advantage of the federal credit
  • Homeowners with enough cash to pay for their solar installation

Solar loan

  • Homeowners who don’t have the funds to buy a solar system, but still want to keep their electricity bills as low as possible
  • Homeowners who want to be eligible for all tax rebates and incentives

Solar lease or PPA

  • Homeowners who don’t want to deal with system maintenance
  • Owners not eligible for tax credits

Frequently Asked Questions: Solar Financing

What’s the best way to finance solar?

If you have the funds, paying cash is the cheapest way to finance solar. For those who don’t have the funds, a solar loan is usually the best solution. For most homeowners, leasing doesn’t make as much financial sense.

Is financing available for solar?

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

Is it smart to finance solar panels?

For those who do not have the funds to purchase solar equipment, 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 breakeven point, but still allows you to lower your electricity bills and increase the value of your property. For many homeowners, solar loans are worth it.

Can you rent solar panels?

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

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