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What you should know about solar loans

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Solar loans can finance the installation of solar panels. Find out how to get a solar loan and if it’s the right move for you. (Shutterstock)

Solar panels can potentially save homeowners between $10,000 and $30,000 in electricity over the life of their solar system. according to solar marketplace EnergySage. And the potential for tax credits can increase the annual benefits of solar power in the home even further.

But installation doesn’t come cheap — about $20,000 on average, EnergySage reports. A solar loan could help cover the costs. So if you’re considering making the move to solar, it’s important to understand how solar financing works, whether it’s worth buying solar panels, and the tax advantages of a solar panel system.

Visit Credible to learn more about personal loans for solar panels and View your pre-qualified rates.

What is a solar loan?

Solar loans are similar to home loans. These unsecured personal loans help you finance the installation of solar panels for your home and they do not require collateral. Rather than paying the entire cost upfront, spread your payments out in installments.

If you are approved for a personal loan, you will receive an amount of money (usually via a direct deposit). One of the best things about personal loans is that they get you your money quickly — some lenders even offer same-day financing. They pay monthly installments with a fixed interest rate and usually have a term of between two and seven years.

You can apply for a solar loan from a personal lender or directly from a solar panel company that offers internal financing.

Is it worth buying solar panels?

Installing solar panels is expensive. The average five-kilowatt residential system can cost anywhere from $15,000 to $25,000 before tax incentives and credits. according to the Center for Sustainable Energy. And it takes an average of six to nine years to recoup those costs.

To determine if the cost of installing solar panels is worth it, ask yourself a few questions:

  • How much electricity do you currently use and how much does it cost?
  • How much sunlight does your house get? (Homes in states with year-round sunlight, like Arizona, can benefit more from solar panels than homes in rainier climates, like Washington.)
  • How big would a solar system have to be installed?
  • Would you buy or lease your system?

After considering these factors, compare offers from a few different solar companies. Then qualify for a personal loan and compare personal loan rates and terms with solar company financing options. Finally, compare the total cost of financing the solar installation to the estimated savings that the solar panels will provide over the life of the loan.

You can use Credible’s Personal Loan Calculator to see how much you will pay over the life of a solar loan from a personal lender.

Tax benefits of solar panels

Currently, you can claim a government tax credit for residential solar energy equal to 26% of the cost of the system. If you install a system in 2023, the credit drops to 22%. That solar tax credit expires in 2024 unless Congress renews it. Visit the Energy Efficiency and Renewable Energy Office website Learn more about this tax credit.

Your state may also offer incentives for installing solar panels. Visit the Database of state support for renewables & efficiency to find out what tax benefits you can claim.

How to get a personal loan for solar panels

Follow these steps to get one Personal loans for solar panels:

  1. Check your credit. Check your credit report for free on a site like and fix any errors that might be preventing you from getting the best possible solar loan terms.
  2. Compare lenders. Compare multiple lenders to see which offer the lowest interest rates and the most flexible terms for your financial situation.
  3. Use. Once you’ve found the best price and terms, secure it by submitting your application.
  4. Get your loan funds. If your loan is approved, you will receive your loan, sometimes even the same business day depending on how quickly your bank processes the transaction.

Other financing options for solar loans

You may also want to consider the following options for financing your solar installation:

  • Own financing With in-house financing, you can finance your solar panel installation directly through the solar panel company.
  • payout refinancing — A Refinance cash out replaces your existing mortgage with a new mortgage while also using your home’s equity to cover additional expenses. But this process puts your home at risk as you are using it as collateral for the loan.
  • Home equity loan or HELOC A home equity loan or line of credit (HELOC) also allows you to borrow money against the equity of your home. With a home equity loan, you receive a lump sum cash payment, typically up to 80% of your home’s equity. A HELOC, unlike a traditional loan, is a revolving line of credit — you can withdraw as much or as little as you like, up to a set limit. One downside is that HELOCs have variable interest rates, which can increase your overall borrowing costs.
  • Leasing or use of a power purchase agreement — Leasing solar panels is similar to leasing a car: you use the solar panel system for a set period of time. You pay monthly payments and may not need to deposit a lot of money initially. The downside is that you don’t own this system and aren’t eligible for any tax credits. A power purchase agreement is a special arrangement whereby a developer installs and operates a solar panel system on your home – you don’t own the system, but you buy the electrical power for a set period of time. This means that you can save electricity during this period, but the owner of the installation is the one who receives the tax credits.
  • Fannie Mae HomeStyle Energy Mortgage With a HomeStyle energy mortgage, you can finance energy-saving systems when buying or refinancing your own home. These loans qualify for an additional loan-level pricing credit of $500. But if you’re not buying a home or you’re refinancing your current home, this may not be the right option for you.

Frequently asked questions about solar credit

Here are the answers to some frequently asked questions about solar loans.

Is it better to buy or lease solar panels?

The most beneficial decision is the one that best suits your financial situation. Buying solar panels can be expensive, but you can save in the long run. When you lease, you pay less money up front, but you don’t qualify for the federal tax credit.

What credit rating do you need for a solar loan?

Although it is possible to get a solar system Credit with a credit score below 650Lenders generally offer the best interest rates and terms to borrowers with good to excellent credit scores (670 and above).

What happens to your solar panels when you move?

Once you have purchased your solar panels, you can either include them in the sale of the house when you move or take them with you. When you lease your solar panels, you also have two options: you can buy out the lease, or negotiate to have the next homeowner take over the lease.

How to choose the best solar loan?

The best solar loan is the one that allows you to comfortably afford the monthly loan payments while maintaining your lifestyle and achieving your other financial goals.

Can you refinance solar loans?

You can refinance a solar panel personal loan through your original lender or another lender by taking out a new loan that pays off your original loan. Just check with your lender to see if they will allow you to refinance your loan.

Does a solar loan affect your credit score?

A solar loan or personal loan can help your credit score Building a positive credit history and creating a diverse mix of credit. But if you miss payments, it can happen damage your creditworthiness.

Credible leaves you easy Compare personal loan rates from different lenders in minutes without hurting your credit score.

Richard Dement

The author Richard Dement