Best Solar Panel Loans

Adding solar panels to your home can be a good way to conserve energy and save money on electricity. In fact, they could save you between $20,000 and $96,000 over the lifetime of your solar panel system, according to EnergySage.

However, while this could help you to greatly reduce your electricity bill, adding solar panels to your home can be expensive. One way to potentially cover this expense is with a solar loan — a type of personal loan used for adding solar panels or otherwise improving your home’s energy efficiency.

Compare solar panel loans

On average, solar panels can cost anywhere from $12,000 up to $30,000, according to Modernize Home Services. Keep in mind that your actual cost can vary depending on:

• Where you live
• The types of panels you choose
• How many panels you purchase
• The company you hire

If you decide to take out a personal loan to pay for solar panels, it’s important to consider multiple lenders by prequalifying first.

10 best loans for solar panels

As you compare your personal loan options, keep in mind that personal loans for solar panels or other upgrades for energy efficiency are generally referred to as home improvement loans.

Learn More: Kitchen Remodel Loans: Compare Financing Options Online

How to get a personal loan for solar panels

If you’re ready to take out a personal loan for solar panels, follow these four steps:

1. Check your credit. When you apply for a personal loan, the lender will check your credit to determine your creditworthiness — so it’s a good idea to take a look at your credit beforehand to see where you stand. You can use a site like AnnualCreditReport.com to review your credit reports for free. If you find any errors, dispute them with the appropriate credit bureaus to potentially boost your score.
2. Compare lenders and pick a loan option. Be sure to shop around and compare as many personal loan lenders as you can to find the right loan for your needs. Consider not only interest rates but also repayment terms, any fees charged by the lender, and eligibility requirements. After you’ve done your research, choose the loan option that works best for your needs.
3. Complete the application. Once you’ve picked a lender, you’ll need to complete a full application and submit any required documentation, such as tax returns or pay stubs.
4. Get your funds. If you’re approved, the lender will have you sign for the loan so the funds can be released to you. The time to fund for a personal loan is usually about one week — though some lenders will fund loans as soon as the same or next business day after approval.

Check Out: 17 Installment Loans to Consider

Is it worth it to get solar panels?

Getting solar panels might be worth it in some cases, but it isn’t right for everyone. Here are a few factors to consider while making your decision:

Size of your home

If you have the roof space, you might be able to fit quite a few panels and save even more on future electricity bills. However, this also means paying more up front to install the panels.

If you have a smaller home, you’ll need fewer panels — but you might not save as much on your electricity bill.

Geographic location

Where you live plays a large part in determining whether you should install solar panels as well as how many panels you can get. Additionally, if you’re in an area that has long winters or days with limited sun, you’ll generate much less compared to someone who lives in an area with long sunny days.

The way your home faces also impacts how many panels you can get. For example, if a large part of your roof doesn’t get sun until the later part of the day or if trees and foliage are blocking the panels, it might not be worth installing panels on that side since they won’t be getting maximum sun exposure.

Cost of installation

Depending on where you live and when you get your panels installed, it could take up to a month or more to notice a difference in your electricity bill. And even if there’s a dip in your bill, you’ll still need to manage your monthly payments — whether you bought or leased your panels.

If you take out a solar loan to cover your costs, you might end up either breaking even or saving a bit overall in the first few years until your loan is paid off.

Solar panel tax benefits

Homeowners who install solar panels could be eligible for the federal solar energy tax credit. If you install a solar panel system from 2022 to 2032, you could get a 30% tax credit. This credit is reduced to 26% in 2033 and down to 22% in 2034.

To be eligible for this credit, the system must be installed during the tax year and generate electricity for a U.S.-based home.

Learn More: Where to Get a $20,000 Personal Loan Fast

Other types of solar loans

A personal loan isn’t your only option for financial solar panels. Here are a few other types of solar loans to consider:

In-house financing

Some solar companies provide their own financing options or partner with lenders that offer solar loans. This could be a simple route if you’re already planning to buy panels from the company.

Home equity options

You could also consider tapping into your home’s equity, such as with a home equity loan, home equity line of credit (HELOC), or cash-out refinance. Because these options are secured by your home, they often come with lower interest rates than personal loans.

Just remember that if you can’t keep up with your payments, you risk losing your home.

Leasing panels

If buying solar panels outright is too expensive, you could think about leasing them. These leases typically last for 20 or 25 years, after which you’ll return the panels.

However, keep in mind that leasing solar panels could also make it difficult to sell your home in the future if you haven’t finished your lease. In this case, you’ll generally either have to buy out the lease or negotiate for whoever buys your home to assume the lease.

Check Out: How to Find a $35,000 Personal Loan Without Stressing

Solar Power Purchase Agreement

You could also look into a Solar Power Purchase Agreement (PPA), where you allow a third party to install a solar panel system. You’ll make payments to this third party for your electricity while they benefit from the tax credits and sale of electricity.

Like leasing, a PPA could be a good choice if you don’t plan on staying in your home long term or don’t want to pay for installing panels yourself.

PACE solar loans

The property assessed clean energy (PACE) model was created to finance energy efficiency and renewable energy on private property — both commercial and residential. PACE programs are designed to help property owners install energy improvements (like solar panels) without having to come up with an upfront payment.

If you decide to work with a PACE program, you’ll repay the improvement costs over 10 to 20 years via property assessments. These assessments are secured by the property and are paid along with your property taxes.

Unfortunately, residential PACE financing programs are only offered in California, Florida, and Missouri. But there are also some cities and utility companies that offer their own solar financing options — be sure to reach out to your city government and utility company to see if any assistance is available to you.

Fannie Mae HomeStyle Energy mortgages

A HomeStyle Energy mortgage can be used to help improve the energy efficiency of your home and can be applied for during an initial home purchase or a refinance. With this option, you can finance energy-related improvements up to 15% of the “as completed” appraised property value of a home.

This type of mortgage could come with lower interest rates and longer repayment terms compared to other alternatives.

Learn More: COVID-19: How Personal Loan Lenders Are Helping Borrowers

Solar loans FAQ

Here are the answers to several commonly asked questions regarding solar loans.

Does a solar loan affect credit score?

When you apply for a solar loan, the lender will perform a hard credit check to determine your creditworthiness. This could cause a slight dip in your credit score — however, this effect is usually only temporary, and your score will likely bounce back within a few months.

Additionally, a solar loan might actually help your credit score. For example, if you consistently make on-time payments or can diversify your credit mix by taking out a personal loan for solar panels, you could see an improvement in your score over time.

Ultimately, this positive impact on your credit score could outweigh any initially negative effects.

What credit score is needed for solar panels?

This depends on how you want to finance your solar panels. If you want to use a personal loan to pay for them, you’ll typically need good to excellent credit to qualify — a good credit score is usually considered to be 700 or higher.

There are also several lenders that offer personal loans for bad credit. However, keep in mind that these loans will likely come with higher interest rates compared to good credit loans.

Check Out: How to Find a $30,000 Personal Loan for Any Credit Score

Is it better to lease or buy solar panels?

In general, buying solar panels will likely save you more money in the long run compared to leasing and could also qualify you for tax deductions or other incentives. Additionally, if you plan to sell your home, you could get more money if you also sell the panels.

However, if covering the entire cost of solar panels is too high, then leasing could be a decent option. Just keep in mind that because the leasing company owns the panels, you won’t be eligible for tax deductions — and you might be subject to increasing payments over time that could further reduce your savings.

What happens if I decide to move?

This depends on whether you bought or leased your solar panels.

• If you bought your solar panels, you could opt to take them with you when you move. However, removing and reinstalling solar panels can be expensive — and the process could damage the roof for the next owner of the house. Because of this, selling the panels along with the home could be a more cost-effective choice.
• If you lease your solar panels and want to move before your lease is up, you’ll have to either buy out the lease or negotiate for the next owner of the house to assume the lease. In general, buying out a solar panel lease can be very costly — which is why it’s generally not a good idea to lease if you expect to move in the near future.

Can you refinance solar loans?

Yes, you can. To refinance a personal loan that you used to purchase solar panels, you’ll simply take out a new personal loan to pay off the old one. Depending on your credit, this might get you a lower interest rate, which could save you money on interest and even help you pay off your loan faster.

Or you could opt to extend your repayment term to reduce your monthly payment. Just remember that choosing a longer term means you’ll pay more in interest over time.

How long are solar loans?

Depending on the lender, personal loans for solar panels typically come with repayment terms ranging from one to seven years. There are also some lenders that offer longer terms for home improvement loans — for example, you could have up to 12 years to repay a LightStream home improvement loan.