How Does Solar Panel Financing Work?

Average Cost of Solar Panels in 2022

Solar Panel Savings

• System size
• Energy consumption
• Direct hours of sunlight daily
• Roof size and angle
• Local electricity rates

Solar Panel Financing Options

• HELOC (home equity line of credit)
• Solar Panel Leasing
• Your Savings
• Home Equity Loan
• Credit Cards
• Personal Loans

HELOC

• Your home is the collateral for a HELOC, so interest rates will be lower than some other options.
• You can use the funds for a wide variety of purposes, including solar panel finance.
• You use only the amount you need, when you need it.
• Making payments on time may raise your credit score.
• Repayment options are often flexible.
• You may be able to deduct the interest from your taxes in certain situations.

• Because your home is the collateral for a HELOC, if you don’t make your payments, the lender can foreclose on it.
• You reduce your equity in your home.
• Interest rates are variable. 
• It can be easy to overspend with a HELOC because it is a revolving line of credit.

Solar Panel Leasing

• You don’t pay upfront installation costs.
• You often aren't responsible for maintenance costs.
• You benefit from energy savings without having to buy solar panels. 

• When you purchase solar panels, you typically get free electricity after paying them off. With leasing, you don’t.
• You can’t benefit from any of the available tax credits or rebates.
• When you sell your house, buyers may not want the obligation of a solar panel lease and consider it a disadvantage.

Your Savings

• Paying with cash instead of taking out a solar panel loan is more straightforward.
• You won’t need to qualify for a loan.
• You don’t pay interest or fees.

• Paying for solar panels means you can’t use that money for other purposes.
• You’ll lose interest the money may have been earning in a bank or investment account.
• It will take eight years on average to recoup the money through energy savings.

Home Equity Loan

• Interest rates will likely be lower than many other types of financing.
• You can typically get a fixed interest rate with a long payment term.
• If you have enough equity in your home, you may be able to borrow a significant amount of money.

• If you default on the loan, the lender may foreclose on your house.
• You will have less equity in your home.
• You might take out more money than needed and risk overspending.

Credit Cards

• They are easy and convenient to use. 
• Making your payments on time can help strengthen your credit score. 
• If you pay off the balance at the end of the billing cycle, you won’t owe any interest. 
• Depending on the credit card, you can earn rewards. 

• Credit cards have higher interest rates than many other options and may also have fees. 
• Late payments can damage your credit score.
• Applying for too many credit cards can also hurt your credit. 
• It’s easy to overspend.

Personal Loans

• A flexible form of funding that can be used in many ways, including as a green loan or a solar loan.
• Personal loans can provide fast access to cash, sometimes within hours of approval.
• Can help you build and strengthen your credit score.
• Interest rates can be comparatively low.
• Borrowers with good credit scores can often borrow tens of thousands of dollars.
• Personal loans are often unsecured with no collateral needed.

• Personal loan requirements explained can include a hard credit check, which can temporarily lower your credit score. 
• Interest rates can be higher than some other types of funding, such as home equity loans and HELOCs.
• Some lenders charge additional fees and prepayment penalties.
• Monthly payments can be higher than some alternatives.
• Personal loans increase the amount of debt you carry.
• Some lenders require collateral.

  Exploring Personal Loan Options