Solar Power Loan and Financing Options | (888) 210-3366 | Local V.
Getting solar panels installed for your home has never been cheaper. Financing options are available at affordable rates for those who wish to get the benefits of solar panels without breaking the bank.
Power Purchase Agreements
Power Purchase Agreements (PPA) are a two-party contract that is a type of Third–Party Ownership (TPO). The power is purchased at a fixed rate, as the system is not owned by the homeowner, but by the solar company. With a solar PPA, you agree with the solar company to pay per kilowatt-hour for the electricity produced by their solar panels. With a Solar Power Purchase Agreement, you are paying for the power, not the equipment. You do not have to pay the high up-front costs of solar panels and equipment. Typically repairs, maintenance, and monitoring are included in the contract. This means that you are getting all of the benefits of solar without having to worry about occasional costly expenses of solar, such as maintenance and repairs.
Benefits of a Solar PPA
- Reduced Energy Costs
- Limited Risk
- Flexible and Affordable
- Potential Property Value Increase
Solar Energy Loans
Solar panel loans are similar to home improvement loans in that they are a conventional bank loan that allows you to pay for your solar panels by fixed monthly payments with competitive interest. Your primary lender would be the best option to get more information about your specific financial situation.
Keep in mind that there is a significant difference between a solar panel loan and a regular home improvement loan. A solar panel loan allows you to leverage debt to own an asset that generates value for your home as well as generating electricity to minimize your electrical payments.
Hero Program
The Hero program, or the Home Energy Renovation Opportunity program, is a partnership between contractors and local governments that helps more people make home upgrades that save energy and water. Instead of homeowners paying for their solar panels upfront, Hero participants receive financing plans from Hero, from five to twenty years long. And, instead of paying it off like a credit bill, homeowners pay it on their annual property taxes and qualify based on their home equity.
The financing process is simple and straightforward. You can apply online with the Hero program, and they provide quick approvals.
The process looks like this:
- Apply – Find out how much your home is approved for
- Select – Choose the eligible products and select the contractor for the job
- Sign – Sign your financing documents
- Complete – Finish the installment
Semper Solaris has had a fruitful partnership with the Hero program and is proud to be a Hero Registered Contractor. Thanks to the Hero program, Semper Solaris can install panels right away, and homeowners can immediately slash their electric bills.
Semper Solaris is also a Channel Partner, which means we have a unique position that contractors can qualify for based on sales numbers, establishing an excellent internal record with Hero and, most importantly—customer satisfaction.
Semper Solaris is proud to offer top-notch service for your solar and roofing needs, and to do it in an affordable way for many homeowners, thanks to Hero.
Buying, Leasing and Financing Solar Panels
At Pineapple Energy, we believe going solar should be attainable for everyone. We offer various solar panel financing options to help you achieve your solar goals. We provide the opportunity to purchase, finance or lease your solar panels. The price of solar energy from Pineapple is usually lower than the cost customers pay to their utility provider.
Cash Purchase
Pay for your solar panels in full or through a personal or home equity loan. You make all payments upfront versus monthly payments with a cash solar system purchase. We provide a complete 25-year production guarantee, so you feel secure in your investment.
Advantages of a cash purchase solar panels include:
- No monthly solar payments
- Generous federal and state tax incentives
- Hassle-free payment process
Solar Panel Financing
Solar loans are available to homeowners to own their solar system while paying for it over time. Our priority is to provide monthly payment options to keep solar affordable.
Advantages of financing solar panels include:
- 30% tax credit/generous federal and state tax incentives (like the cash advantages)
- No money down
- Predictable monthly payments
Leasing Solar Panels
Instead of owning the solar panels, Pineapple offers the option to lease. Once the lease term is completed, homeowners can either buy out the solar system, extend the lease or have the company take the solar system off their roof. There is no upfront cost, and it’s an affordable monthly amount paid to the lease provider.
Act Now and Take Advantage of 1000s in Federal State Incentives
Homeowners who install solar panels can benefit from a federal tax credit of 30%. This credit was recently extended with the passage of the Inflation Reduction Act of 2022 and will remain in effect for the next ten years. Some states and utility providers have additional unique incentives for their location. The sooner you go solar, the more you save!
We do a soft credit pull to determine creditworthiness. A credit score of 650 and above is required.
Interest rates are at lowest 3.5%
There is no money down required for leases, power purchase agreements and loans.
Homeowners who install solar panels can benefit from a federal tax credit of 30%. This credit was recently extended with the passage of the Inflation Reduction Act of 2022 and will remain in effect for the next ten years. Some states and utility providers have additional unique incentives for their location. The sooner you go solar, the more you save!
While solar is not free of charge, the goal is to replace your utility bill with a solar payment that will be lower than your average utility costs.
For example, an average monthly solar utility bill might look like 90 for solar and 10 for the utility in CA with a utility bill before solar of 200/month.
If you decide to lease solar, there is typically a rate increase each year that is lower than your utility inflation rates.
You will still be connected to the electric grid and receive statements from your utility provider.
How solar loans work
Solar loans aren’t as simple as other kinds of loans, so there’s a lot to learn.
The key features and concepts to understand about solar loans include:
- Secured vs. unsecured
- Dealer fee (aka finance charge)
- Interest rate
- Term (length)
- Balloon payments
- Monthly payments
Let’s start by saying that solar-specific loans are generally unsecured, meaning they are not backed by an asset (such as your home) as collateral. This differs from car loans, home equity loans, and HELOCs (home equity lines of credit).
Home equity loans and HELOCs can be a good alternative to solar loans for some people. We’ll talk more about these alternatives below.
Some solar-specific loans are secured by the value of the solar equipment. Loans from credit unions like Clean Energy Credit Union and Tech Credit Union offer these kinds of secured loans.
Dealer fees
Let’s be real for a second. When banks lend money, they want to be reasonably certain they’ll get that money back, and they’re pretty good at figuring out how to do it.
Lending money requires accepting some risk that the loan won’t be paid in full, and the banks take care of that risk by requiring dealers (i.e., solar installers) to pay a fee to initiate the loan. That fee is passed directly on to the buyer (i.e., the homeowner) in a solar installation contract and becomes part of the principal of the loan.
To determine the size of the dealer fee, always ask for a cash quote from the installer alongside a quote with financing included. The difference between the cash price and the principal of the loan will reveal the size of the dealer fee. Each solar company will have its own dealer fees based on their agreements with their lending partners.
Be careful: Dealer fees can add thousands of dollars to the cost of a solar system. Average dealer fees for solar loans in 2023 are around 25%, but we’ve seen them as high as 40-50%. These fees can reduce your return on investment in a solar purchase. Be sure to consult with a trusted financial advisor before choosing a solar loan with a dealer fee.
The dealer fee is also sometimes called a “finance charge” or “buy down” because it is designed to keep the interest rate low for the life of the loan.
Interest rates
Interest rates for solar loans are typically lower than other financing options, such as personal loans, home improvement loans, and credit cards.
Financing companies keep the Annual Percentage Rate (APR) on their loans low by increasing the dealer fee. That guarantees that the bank makes a good return on the loan while keeping loan payments relatively low fixed rates for homeowners.
In 2023, interest rates on unsecured solar loans with dealer fees average between 2.99% and 5.99% APR.
Secured solar loan providers like the credit unions mentioned above often don’t require a dealer fee but have higher APRs. For example, Clean Energy Credit Union offers solar loans with APRs of between 7.49% and 8.24% (as of mid-2023).
Solar loan term length
Most solar loans range between 15 to 20 years, but 25-year loans are becoming more common.
In general, it can be wise to spread payments out over as many years as it takes to make the monthly payment closely match the average energy bill savings provided by the solar installation. That way, you can “break-even” in the initial years of the loan and save money each year as electricity rates increase.
Many large solar energy companies like Sunrun, SunPower, and Sunnova now offer 25-year solar loans that also come with 25-year labor and workmanship warranties. Essentially, these are long-term service agreements where you end up owning the solar panels at the end.
For some people, these very long loans work out okay. There can be value in choosing a long-term relationship with a company that is built to last for 25 years. Others will prefer to take shorter loan terms in order to more quickly take ownership of their solar panels. What works best for you is your decision to make.
Balloon payments and how solar loans work with the federal tax credit
The concept of a balloon payment is very important when it comes to solar loans. Nearly all lenders calculate the monthly payments for the loan based on the idea that the homeowner will pay off up to 30% of the loan value within 12-18 months after loan origination.
That 30% amount is equal to the value of the federal solar tax credit, and this payment is often referred to as the “Incentive Payment”.
This is such an important concept to understand because the tax credit can often be worth thousands of dollars, and it is not a sure bet that everyone will be able to claim it. The tax credit is “non-refundable,” which means the taxpayer’s tax liability limits it.
Solar loan alternatives
There are a few alternatives to a traditional solar loan for homeowners to explore, including home equity loans or lines of credit (HELOCs) and solar leases and PPAs.
HELOC
A HELOC is a line of credit available to homeowners with equity available in their home.
Advantages of HELOCs include the lack of a dealer fee, no requirement to pay the amount of the federal tax credit within a certain period, and low-interest rates at or near current mortgage rates. Another plus for a HELOC is that it is a flexible way to pay for more than just a solar panel installation.
The disadvantages of HELOCs are their relative difficulty to obtain. They have stricter credit score requirements, require equity in the home, result in more paperwork for the borrower, and sometimes include closing costs and other fees.
PACE loans
PACE, which stands for Property-Assessed Clean Energy Financing, is a newer kind of loan that offers some flexibility to low-income borrowers, requires no minimum credit score, and is paid back through the homeowner’s property tax bills.
PACE programs exist in a handful of states, including Florida, California, and Missouri.
Solar loan FAQ
Here are some of the most important questions people ask about solar loans:
Q: Do solar loans require a down payment?
Most solar loans do not require a down payment but instead include a finance charge or dealer fee that gets wrapped into the principal of the loan.
Some lenders offer two separate loans at the time of sale: one for 70% of the system cost that is amortized over many years (10 to 20 is common) and another for 30% that is required to be repaid within 12 to 18 months. This second loan is based on the value of the federal solar tax credit, which can earn homeowners a tax credit of 30% of the cost to install the system when filing taxes for the year the system was placed into service.
Q: Is a solar loan considered a second mortgage?
A solar loan is not considered a second mortgage, but some lenders place a special lien on the solar installation called a UCC-1 filing (from the Uniform Commercial Code). This UCC-1 lien protects the lender’s interest in the solar property in case of default until the loan is paid in full and is a public record.
The UCC-1 filing can sometimes cause confusion with mortgage lenders, who can see the filing and might consider it a lien on the property if the homeowner seeks to refinance the mortgage or moves to sell the property. In this case, you can work with the lender to have them provide proof that they have no interest in the property other than the solar system.
Q: Can you pay off a solar loan early?
Nearly all solar loans come without a prepayment penalty and can be paid off at any time. Like other loans, you should contact your lender for a payoff quote. Some people have chosen to pay off solar loans as part of refinancing in order to roll the remaining cost of the loan into a new mortgage.
Q: What is the minimum credit score needed to qualify?
In general, a credit score of 580 is required for most kinds of solar loans. Some solar lenders advertise that they have no minimum credit score requirements, while others place limits on buyers’ credit scores or require a filing fee based on credit score. Buyers with better credit scores can receive better interest rates on certain solar loans.
Bottom line: are solar loans a good idea?
Loans can be a great way to pay for solar panels. If you can design a loan with a monthly payment less than or equal to the average monthly savings the solar installation will generate, you can essentially be cash flow positive from day one.
But it’s still important to be careful when it comes to money. Some unscrupulous solar installers and/or lenders target the cost of the systems they sell so that the monthly payment on the loan is close to the energy bill savings the solar installation will provide. This can mean the price of the system is much higher than it would be if the homeowner paid cash or purchased the system somewhere with lower electricity rates.
Solar Financing
and more consumers are choosing to go solar. But not only do consumers need to research whether solar is right for them and what company they should choose, they also need to consider how they will pay for it. Going solar does involve a significant expense, and paying cash upfront may not be the best option. There are different kinds of financing available for solar. They generally fall into two categories. The first is Third Party Ownership Financing. The second is Solar Loans.
In Third Party Ownership arrangements, a company agrees to put solar panels on your roof but will charge you for the electricity that they produce. The two types of contracts available are solar leases and Power Purchase Agreements.
- Solar leases
In a lease contract, aThe agrees to pay a fixed monthly “rent” or lease payment, in exchange for the right to use the solar energy system. The lease payment is calculated using the estimated amount of electricity the system will produce.
In a PPA, a third–party developer owns, operates, and maintains the system. The customer agrees to site the system on its property and, instead of paying “rent,” purchases the power generated by the system at a fixed rate.
One of the main advantages of a PPA over a lease is that if the panels are not working for a period of time, or are producing less power than quoted, then the payments for the system fall accordingly. With a pure lease, the monthly amount is due regardless of actual electricity production from the panels.
Solar leasing companies offer different types of solar leases/PPAs. Not all are
Solar Loans
When you purchase solar panels, you receive the benefit of both the value of the electricity generated by the solar panel system over its lifespan and any investment tax credits and other applicable rebates and incentives. Solar loans are a financing option if you do not have the money for a cash purchase, but want to own the system yourself. They are similar to other home improvement loans and can also vary widely in their terms. They can either be secured or unsecured. Loans with longer terms will have smaller monthly payments, but you will pay more in interest over the life of the loan. Loans with shorter terms may exceed your monthly utility bill savings, but you pay less in interest over the life of the loan.
- Secured loans – require collateral – usually your home.
- Interest is tax deductible
- Better interest rates and term lengths than unsecured loans
- all fees and miscellaneous charges for loans required to be disclosed upfront
- Need equity in your home and a good credit rating
- May take weeks to complete
- Lenders may foreclose if you default
- Must pay off the balance of the loan when you sell your home
- Unsecured loans– do not require collateral other than the solar system itself.
- Don’t need equity in home and lender can’t foreclose if default
- Interest is not tax deductible
- Higher interest rates than secured loans
- Cost more and have lower overall financial benefits than secured loans
- May be more quickly approved
- Fees can be significantly higher than secured loan fees, and may not be disclosed upfront
- Can sell your home without paying off loan, but will still be responsible – loan stays with the person, not the property
down. Some have custom down payments, and others are prepaid. Companies may advertise “free solar panels” when marketing this kind of financing for solar. But while there may be no upfront cost to you, you do not own the system, and the solar energy produced is not free. The tax credits, rebates, and other financial incentives belong to the owner of the system (not you), so you do not receive these benefits.
Lease and PPA terms can vary greatly. It is very important to review contracts carefully and understand all of the terms. Things to consider:
- What is the term length? Residential solar leases and PPAs are usually for 20 to 25 years.
- How are payments calculated? Rent (lease) and rate (PPA) usually increase over time.
- Who is responsible for performance and maintenance? The leasing company will monitor the system’s performance to ensure that it is operating correctly for the duration of the lease. They are also responsible for maintaining and repairing it.
- How is the system monitored? Most solar leasing companies offer free online, smartphone, or tablet programs to track your solar panel system’s performance.
- Can you buy the system? You may be able buy the solar panel system during the lease term. The terms for any purchase will be defined in the contract.
- What happens if I sell my home? Options may include transferring the remainder of your lease to the homebuyer or buying the system from your leasing company yourself and including it in the sale of your property.
- What happens at the end of the term? Options may include buying the system outright, having the leasing company remove it, or leaving the system in place and renewing the agreement with the owner.
Third Party Ownership Financing vs. Solar Loans
- Cash Flow: Monthly savings from a solar loan are likely to be higher than the savings from a solar lease or PPA. This is because solar loans are typically paid down in 7 to 15 years, whereas leases require regular payments over the term of the agreement.
- Financial Incentives: If you choose to finance with a solar loan, you directly benefit from the financial incentives. If you sign a solar lease/PPA, the owner of the system is the solar company, and they receive the financial incentives instead.
- Monthly Payments: Solar leases and PPAs are generally offered for a 20- or 25-year term, and the terms for solar loans can vary from 5 to 20 years. The monthly payments for most solar leases and PPAs increase over the term of the lease, while solar loans typically have fixed monthly payments. The monthly payments for a 20-year solar loan are likely to be lower than those of a 20-year lease or PPA.
- Operations and Maintenance: With a solar lease or PPA, the leasing company owns the system and typically will offer a service program to cover any maintenance issues that arise during the lease term. With a solar loan, you, as the owner, will be responsible for its maintenance.
- Selling Your Home: Home buyers are required to take over a lease or PPA unless the seller pays it off in full. This can have a negative effect when it comes time to sell, especially if there are cheaper and better solar products available. There can also be problems with the buyers qualifying to take over the lease. If you opt to use a solar loan to finance your system, your options differ depending on whether your loan is secured or unsecured, but the home buyer has no obligations.
Owning your own system generally produces the highest savings in the long run and has fewer potential problems when it comes time to sell your home. However, if you cannot afford the upfront costs of a cash payment, don’t qualify for a loan, or can’t use the tax credits (you need taxable income before you can use a tax credit), a lease could be your best option for making solar possible.
For more information on going solar: Solar Energy: A Consumer’s Guide (OCP Newsletter) Consumer Protection Issues When Going Solar ( YouTube webinar) Too good to be true: Know your consumer rights about solar energy (My Green Montgomery blog)
Solar Power On The Roof And In The Neighborhood: Maine Report