BlueWave's flexrate solar loan: The complete review

Note: As of fall 2019, BlueWave no longer offers residential solar financing.

Solar loans are an increasingly popular option for people interested in financing their solar panel systems. The trend away from leases and towards an ownership model like solar loans results from two key factors: the economic benefits and incentives available to solar customers and the greater accessibility of solar loan options.

Among companies offering solar loans, Boston-based BlueWave Solar is becoming a popular financing option for homeowners purchasing solar panel systems nationwide. Their newest option, the FlexRate loan, allows homeowners to finance their solar panel system at competitive introductory interest rates.

Many traditional solar loans will have a fixed interest rate for the duration of the loan. BlueWave's FlexRate loan is a bit different: As opposed to a fixed rate for the duration of the loan term, the FlexRate loan offers a variable interest rate across the loan term. For the first five years of the loan, you can finance your solar panel system at a low introductory rate. Then, the interest rate will adjust based on the current Wall Street Journal Prime Rate plus 0.5% annually.

The Prime Rate is an adjustable rate representative of the interest rate that banks in the U.S. use when lending to creditworthy borrowers. Notably, the FlexRate loan ensures that your interest rate will not dramatically increase if the Prime Rate reaches a record high. There is an annual cap (1%) and lifetime cap (9.99%) on the loan rate adjustment to protect you should the Prime Rate escalate an unprecedented amount.

The FlexRate loan comes with two different term lengths: a 15-year and a 20-year option; it can finance a solar installation for up to $100,000. The FlexRate is offered in six states, including Massachusetts, Florida, North Carolina, New York, Rhode Island, and South Carolina, and BlueWave plans to expand coverage.

There are several benefits to financing your solar panel system with the FlexRate loan from BlueWave.

$0-down

With BlueWave's FlexRate loan, you can go solar with no money out-of-pocket. If your solar panel system covers your electricity needs and your monthly payment is lower than your old utility bill, you'll see savings immediately.

Even if your monthly loan payment is higher than your old utility bill, you're going to realize savings as soon as you pay off your loan (or possibly even before that, depending upon the solar incentives available in your area) and continue to save money throughout the lifetime of your solar panel system.

No prepayment penalties

Another benefit of the FlexRate loan is that there is no penalty for prepayment. This benefit allows you to pay off your loan at any time without incurring additional fees, even if that prepayment occurs before your sixth year when the interest rate changes.

Interest-only payment option

When you finance your solar installation with the FlexRate loan, you can elect to pay interest-only payments for the first 12 to 18 months after your solar panel system is installed. The sooner you pay off your solar loan, the sooner you'll start generating completely free solar electricity, so taking advantage of this offering can mean higher costs over the lifetime of your investment. However, the interest-only payment option is useful should you require more immediate capital for other bills or home improvement projects in the first year of the solar loan financing term.

Solar + storage

With the FlexRate loan, you can finance your solar installation and solar battery storage solution. Both can be fully financed and rolled into the same monthly payment, so long as the total amount you're financing is less than $100,000. The convenience of a single financier for both products helps you save time finding and closing on a separate loan for storage and removes the possibility of confusion from paying two separate monthly loan bills.

No payments until post-installation

With loans offered from BlueWave, you can wait to begin making payments until after your solar panel installation is complete. Ideally, your solar panels will be installed soon after signing a contract, but if your installation is delayed, you will not be on the hook for monthly payments until after the panels are on your roof.

Every home solar installation is different, and BlueWave's FlexRate loan terms will vary regarding loan amounts, durations, and interest rates. As a homeowner, you'll have a few different options for financing your solar projects, and your choice of loan will depend on your priorities.

BlueWave vs. traditional financiers

When choosing a financier, one advantage of going with BlueWave Solar over traditional loan providers is their experience and knowledge of solar technology. The solar industry is still relatively young, making some more traditional banks less likely to provide financing for it. While this is less of an obstacle than it was a few years ago, the fact remains that a company like BlueWave that specializes in solar loans is sure to be well-prepared to answer any solar-specific, lending-related questions you might have.

Another advantage of BlueWave is the company's fast approval process. If you want to finance your solar installation with a home equity loan or line of credit, it can take several weeks for the loan to close and require significant equity in your home and a favorable debt-to-income ratio. By comparison, although BlueWave only offers loans to qualified applicants, their loan approvals can occur within a day. As an added benefit, BlueWave does not use your home as collateral with their FlexRate Loan option– a big contrast from a traditional home equity loan.

If you have a strong relationship with your local bank and they are willing to offer you solar financing through a home equity loan or line of credit, you may want to compare the long-term benefits of that option against BlueWave's loan options.

FlexRate vs. fixed-rate loans

When you're selecting a solar loan option, you'll have to decide on the financier and the type of loan.

BlueWave's FlexRate loan is a unique product unavailable from other solar lenders. Most solar loans have a fixed interest rate, so you know exactly how much you'll owe throughout your loan. By contrast, BlueWave's FlexRate loan will have low-interest rates for the first five years before having variable rates that will change annually for the remainder of your loan term.

Just because interest payments change after year five does not necessarily mean it's a more expensive loan option. You may be able to save money using the FlexRate option instead of a fixed-rate product - especially if you plan to pay off your loan early before the interest rate changes and the introductory rates you're offered for the FlexRate loan are lower than other fixed-rate loan options. Even if you don't pay off your loan early, there is potential for the variable interest rates to be lower than other fixed-rate loan options if the Prime Rate falls over time.

Nevertheless, it is possible that you could pay more with the variable interest rates than you would with other fixed-rate loan options if the variable interest rates climb to a higher percentage than the percentages for fixed-rate loan options. If you're unsure of how soon you'll be paying off the loan and you're looking for the most stable, predictable loan option, then a fixed-rate loan from BlueWave or an alternative solar lender is worth considering.

As you compare all of your loan options, it's a good idea to compare loan terms, interest rates, and overall expected costs before making a final decision.

BlueWave loans, FlexRate, and otherwise, are offered through installer networks. Many local installers who provide solar quotes on the EnergySage Marketplace use BlueWave as a loan provider. If you're interested in a loan from BlueWave, join EnergySage today and indicate BlueWave as your preferred lender when registering your property so that installers can quote accordingly. You can also shop for loans directly on EnergySage Marketplace.

Note: BlueWave Solar is a subsidiary of BWC Holdings, providing home solar loans through their financing partners as BW Finance Company.