What You Need to Know About Solar Loans

You are likely aware of how solar panels can reduce your monthly bills. Solar panels can offer an energy efficiency rating of 11% to 15% for now, but with the advancements in solar energy technology, the rating can still be further improved.

Nevertheless, it might be difficult for you to pay for a solar system entirely. Many homeowners have the same dilemma since solar panels cost around $15,000 to $25,000.

One solution for this is to lease solar panels, and it is rather easy to get a solar loan. Solar loans make it possible for you to get a solar system without having to pay a lot for upfront charges. Continue reading to know more about solar loans.

What Is a Solar Loan

What Is a Solar Loan

You take out a solar loan when you buy or install solar panels. This loan allows you to have your solar panels without the need to have large money for the upfront expenses. Most providers of solar loans require little to no down payment. You can also have the option to pay down early without getting penalized.

Solar loans are considered a home improvement loan subcategory in general. Therefore, you can have many choices for terms, rates, and payment schemes. Many people are interested in getting solar loans since they can see savings from their electric bill immediately when they install a solar system. These savings can be used for the monthly solar loan payment.

Solar panels obtained from solar loans provide convenience, but solar panels purchased with cash have a higher financial return.

Most Important Features of Solar Loans

Secured and Unsecured Loans

Secured loans and unsecured loans are the 2 primary types of solar loans. Assets, which is normally your home, back up the former. That is why the rates are lower. HELOCs or home equity lines of credit and home equity loans are the most common types.

Other examples are R-PACE or residential PACE loans. Your property tax is charged for these. People with lower credit scores are offered these, However, compared to a HELOC or home equity loan, the charges are higher for PACE loans.

There is no asset provided as collateral for unsecured loans. You need a decent credit score, in general, to qualify for an unsecured loan. Depending on how good your credit score is, you can be offered an even lower rate.

Solar Loan Rates

Depending on your credit score, HELOCs and home equity loans normally have 3% to 8.5% APR. The PACE loans are increased at the end of this range which can fall around 6.5% to 8.5%.

For unsecured loans, the rates are higher. APRs can range from 6% to 30% or more. When you have a great credit score, the rate is usually low.

Requirements for Solar Loan Down Payments

As mentioned, many solar loans have little to zero down payments. However, if there is a down payment needed, it is not a lot. The most expensive you likely need to pay is $3,000.

Duration of Solar Loans

The maturity period of solar loans can range from 3 years to 30 years. Nevertheless, the most common loan period is 10 to 20 years. The loan duration and rate have an opposite relation. This means that if you have a lower rate, you have a longer loan period.

Tips on How to Find the Best Solar Loans

  • If possible, choose a secured loan such as a home equity loan. You can have a lower interest if you have collateral.
  • Pay the highest amount possible if a down payment is required. Since the overall cost of your loan will be lowered, you will pay less for the interest.
  • For early repayment, go for minimal to no penalties. You can have a better return if you can pay the loan earlier.
  • You can use your tax refund from your solar tax credit to make payments for your loans. This can lessen your loan payments in the future.
  • You should go for a longer loan period if you prioritize keeping a good cash flow. You can go for the shortest loan duration and highest repayment monthly possible if you want to save.
  • The most effective tip for finding the best solar loan is to inquire about different providers. There are many solar loan providers and plans, so it is best to do your research before deciding.

Tax Deductions on Solar Loans

Tax deductibles on solar loans depend on the type of solar loan you take out. All fees and interests on solar loans are deductible if the asset used is your home. The reason for this is home improvements such as the installation of solar panels are capital projects. The IRS deducts tax for it since it gives your home more value. Unsecured solar loans are not qualified for tax deductibles.


Finally, you understand solar loans. If you have the money or wait to save more, you can consider paying for a solar system outright since it offers the best ROI or return of investment. Nevertheless, if this is not possible, solar loans are recommended since there are little to no upfront payments needed.

Although you opt for a solar loan, there is a chance that you will have a good ROI. You just need to keep in mind to research first to ensure that you get the best deals.

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