Exactly what is a Solar Loan?
- Solar-energy systems financing options
- Types of solar loans
- Should I recieve a solar loan?
Solar-energy systems financing options
If you cannot afford to purchase we've got the technology upfront, you might have several options for solar financing: solar leases, power purchase agreements and solar loans.
Solar leases
With a solar lease, a company installs a solar-energy system on your property, however it still owns the system. You apply the energy generated, and you spend the money for business a set fee on a regular schedule. Depending on the lease, the company might cover equipment and maintenance, or those costs might be you. Be sure you read the lease agreement's small print to discover how much the solar lease can cost you.
Power purchase agreements
Similar to some lease, with a power purchase agreement, or PPA, a solar company installs, owns and maintains the body. You agree to buy the power it generates in a set price per kilowatt-hour that's typically competitive with the neighborhood electricity rate.
Since you don't own the system – for both PPAs and solar leases – you aren't entitled to the residential energy tax credits that can come with installing solar.
Solar loans
A solar loan is what it sounds like: financing that allows you to purchase a solar-energy system and pay it off over time. In contrast to solar leasing or perhaps a PPA, you own the system outright, which could permit you to make the most of tax incentives.
Monthly payments on the solar loan in many cases are smaller than a typical energy bill, based on the U.S. Solar Energy Technologies Office (though creating a larger monthly payment and shortening the word from the loan may spend less over time). And you'll even be capable of getting a subsidized solar loan with a below-market interest rate.
Let's take particular notice in the kinds of solar loans that may be available to you.
Types of solar loans
Solar loans are available in many forms, with features you will possibly not find having a typical personal loan. Here are a few from the solar loan varieties you're likely to encounter.
Home equity loan or line of credit
A home equity loan or credit line, each of which are types of do it yourself loans, enables you to borrow upon your home's equity.
If approved, a house equity loan provides you with a lump sum that you repay in equal installments over a set time period, while a house equity line of credit provides you with revolving credit that you could borrow against (as much as your limit) and reuse while you pay it back (just like a credit card).
While neither is specifically designed that will help you finance a solar-energy system, you should use home equity funds to buy solar technology for your house. However, you should only use these kinds of financing if you're certain you are able to repay it – if you can't, there's the potential you can lose your home altogether.
Unsecured personal loans
Banks, lending institutions an internet-based lenders offer unsecured loans that can be used for just about any purpose, including installing a solar-energy system in your house. While these loans may not be specifically for financing solar, for those who have a good credit score or collateral, you may be able to get a personal loan at a favorable interest rate and repayment terms.
Some lenders even offer unsecured personal loans specifically marketed to pay for solar panel technology. These financing options are typically fixed-rate and paid in equal installments over a set period of time. Just like other kinds of unsecured loans, lenders offer higher rates of interest for unsecured solar loans, since they consider unsecured loans to come with higher risks for that lender.
Secured solar loans
Some solar-installation companies offer loans where you can make an application for financing directly through them. The borrowed funds is secured through the solar-energy system itself – in other words, if you don't repay the organization as promised, the lending company can repossess it. Prior to applying for financing from a solar-installation company though, compare loan terms, rates and costs with other loan options.
Loans from utilities or cities
In some states, certain participating utility companies actually offer on-bill financing programs. Which means you can repay your solar bill via payments that go right on your family utility bill. Additionally, some cities and other jurisdictions offer low-interest loans, rebates along with other incentives for installing solar systems. To see what's obtainable in your neighborhood, view the Database of State Incentives for Renewables & Efficiency.
R-PACE solar loans
Residential Property Assessed Clean Energy loans, which are funded as a result of government programs partnering with private lenders, might be an alternative choice to help you finance your home with energy upgrades like solar-energy systems. But with this type of loan, you pay the cost off over a set number of years as an assessment on your home's property taxes – quite simply, you receive a higher goverment tax bill. Be aware though: These loans aren't available everywhere.
Fannie Mae HomeStyle Energy
If you're buying or refinancing a mature or energy-inefficient home, the Fannie Mae HomeStyle Energy mortgage enables you to finance energy-related improvements as part of the mortgage. It enables you to definitely fund clean-energy upgrades, like installing solar power, at as much as 15% of the home's appraised value. This could eliminate the need to get another solar loan.
Should I recieve a solar loan?
Like any financial decision, there are benefits and drawbacks to taking out a solar loan.
A solar loan could make sense if –
- You want to own the machine but can not afford to pay for upfront
- You want a tax break for installing a solar-energy system
- You don't mind paying for maintenance and repairs yourself
Before you go for a solar loan though, be sure to research all available options and obtain quotes to be able to compare rates of interest and costs. And in your mind that it's a debt that has to be repaid which trying to get financing may decrease your credit ratings.
Once you get your loan quotes, consider the estimates and make sure you are able to adjust your budget to make all the loan repayments promptly.
Bottom line
While paying cash for purchases might be ideal, the cost of solar panel technology makes that impossible for a lot of homeowners. Solar leasing might be an option, but if you want to eventually own your solar-energy system and benefit from the many tax credits and incentives available, a solar loan may be the best way to assist you to live green.