Cash purchases and solar leases (or PPAs) are no longer the only options for property owners who want to go solar. For solar shoppers who lack the capital for a cash purchase but want to maximize the financial benefits of their solar energy system, the solar loan offers the perfect solution.
This video reviews types of solar loans and their benefits.
Solar panel loans are similar to home improvement loans that homeowners have used for decades to build a deck or add a second bathroom to their homes. When a homeowner borrows money from a lender, they agree to pay it back, plus interest, in monthly installments over the loan term.
There is one very important difference between solar panel loans and other home improvement loans: a solar panel loan allows you to own an asset that generates significant financial value. This includes both the value of electricity generated by the solar panel system over its lifespan and the 30% federal investment tax credit and other applicable rebates and incentives like solar renewable energy certificates (SRECs). While a new kitchen or deck is a nice addition to your home, they do not offer the same type of financial benefits.
A solar loan allows you to own an asset that generates significant savings.
Like any other financial product, solar panel loans have different structures, terms, and conditions. In order to find the solar energy loan that is right for you, there are two fundamental questions that you need to ask.
Solar energy loans can be divided into two categories. Secured loans require an asset that will serve as collateral for the loan – in most cases, that asset will be your home. Unsecured loans do not require any collateral other than the solar panel system itself. Both loan categories have implications for the borrower.
The amount you want to pay each month will impact the interest rate and the length of the loan. Loans with longer terms will have smaller monthly payments, but you will pay more in interest over the life of the loan. In contrast, payments on solar energy loans with shorter terms may exceed your monthly utility bill savings, but they offer a better value because you pay less in interest over the life of the loan.
Secured Solar Loan
Unsecured Solar Loan
|Requires an asset (usually your home as collateral)|
|Lenders may foreclose if you default|
|Same-day approvals are possible|
|Interest is tax-deductable|
|May have undisclosed fees|
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