When shopping for solar panels, consider the different payment options available to homeowners. Cash, a home equity loan or a HELOC are popular methods to finance your solar system purchase.
Solar leasing and PPAs are also popular options for homeowners looking to go solar with minimal financial commitments. Sunrun and Momentum Solar offer solar leasing with monthly payments, including warranty coverage, system monitoring and maintenance.
The cash purchase option is best for homeowners who want the full benefits of solar — energy bill savings and tax advantages. It also helps avoid the interest expenses associated with a lease or PPA.
The upfront system costs of a solar power installation can be prohibitive for some households, especially when considering other financial obligations like mortgage payments and credit card debt. However, federal and state incentives may help offset some of the upfront costs.
If you lack the funds to pay in cash, your installer, Solar by Peak to Peak, can provide financing through a third-party lender. They’ll usually offer low rates on solar loans, which are secured by the value of your home. This allows lenders to offer lower rates because they know you have “skin in the game,” a key factor determining your ability to make monthly loan payments. To explore your options for financing, use the free solar calculator. This tool runs custom solar quotes with different financing scenarios and demonstrates your potential for savings.
If you’re uncomfortable using a credit card, other financing options exist. These can range from personal loans to energy-efficient mortgages, which can help make solar even more affordable.
Homeowners in Highlands Ranch, Colorado, who purchase their systems in cash are also eligible for federal investment tax credits, which can save them up to 26% of the system’s cost. In addition, homeowners who own their rooftop systems can benefit from New York’s net metering policy, which credits them for the excess electricity they produce and send back to the grid, reducing their monthly bills.
If you plan to use a loan, it’s important to remember that the average total interest costs will add about $5,000 to your overall project costs and prolong your payback period by about three years on average. Fortunately, lenders tend to favor borrowers with higher credit scores, so improving your score can significantly lower your loan interest rate.
With a solar lease or PPA, green energy adopters pay a flat monthly fee for the system’s solar electricity. These payments often reduce energy costs significantly versus grid power rates.
A contract structure can differ between a PPA and a solar lease, so it’s important to evaluate the terms carefully to ensure they align with your long-term energy needs. For instance, some PPAs may include a yearly escalator that can increase monthly energy costs over time.
Other PPAs might have a fixed price plan that keeps costs low even as utility rates rise. Solar energy contracts should also clearly state whether your agreement can be transferred to a new homeowner or if it requires a buyout upon selling your home. Also, check the contract for any site upgrades that might be necessary. If these aren’t covered in the agreement, they can add to the cost of a solar installation project.
Financing is a great option for homeowners interested in buying solar panels. Many installers partner with specialized lenders to offer financing options like personal loans, home equity lines of credit (HELOC), and in-house loan programs.
The terms of your loan will depend on several factors, including your current credit profile, income, and debt-to-income ratio. You’ll generally want a lender with low-interest rates, minimal fees, and generous loan terms that align with your energy cost savings goals.
While it may take time, improving your FICO credit score is one of the best ways to lower your solar loan interest rate. Ideally, you’ll want a credit score of 650 or higher for the best results. In addition to increasing your loan eligibility, a higher credit score will help you qualify for a more attractive solar loan APR.
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