While most think that you need a large chunk of cash to be able to buy solar panels, more than half of solar owners finance their project using solar loans. Even if you have the means to pay upfront, financing may be a better option if you are looking to experience immediate savings on your utility bills.

Financing Solar Panels

There are two types of solar loans that are equally popular among buyers. There are two types of loans – combo and reamortization loans. Unlike typical loans that are used for a house or car, these are specifically designed to work with the 30% federal solar tax credit. In other words, these loans can delay your down payment until you receive the benefits of the federal solar tax credit. How long it takes to get the full credit depends largely on your yearly earnings; this is why there are different types of plans.

Combo Loans

Combo loans are popular for buyers who are confident they will receive the full benefits of the 30% tax credit within a year. Combo loans are basically two loans in one. First, there is a primary loan that covers the net cost of the system and second, there is a bridge loan for the value of the tax credit. The bridge loan doesn’t accrue interest for the first year or so. This is meant to be paid off when you have received your tax credit, although the money for this can come from anywhere. The primary loan will accrue interest and has a much longer term rate. 

The advantage of this type of loan is that you are initially only paying for the net cost of the system (subtracting the amount covered by the tax credit). Combo loans are a great choice for someone who is confident they can pay off the bridge loan in a short timeframe. If not, it gets rolled into the primary loan balance where it increases the principal and interest.

Reamortization Loans

This type of loan is a better choice for someone who may not have sufficient income to claim the tax credit within one year. Reamortization loans let you pay a lump sum amount at any time to decrease your monthly payments. Generally, this sum is paid when you have received your full tax credit, but this isn’t necessary. This gives you the flexibility to pay however much you want whenever you’re ready.

Solar Loan Terms

The beauty of solar loans is their flexibility and customization. You can essentially create your payment plan. You can pay anywhere from 0%-100% down and set the term length from 5-25 years. Keep in mind that a shorter loan means higher monthly payments but less interest over time, while a longer loan term means lower monthly payments but more money paid toward interest. With the flexibility of both term length and down payment, you can choose exactly how much you want to pay monthly for your “electricity bill.”

Long-Term Finance Savings vs Short Term

Since you control how much you pay and when, your main question when thinking about financing your solar is, “When do I want my savings?” 

A few things to consider:

• The current cent/kWh rate where you live
• The future projections for this rate 
• How long you plan to stay in your current home
• Your current financial state versus your expected future financial situation
• The current solar loan interest rate

A shorter term means a longer payback period but greater lifetime savings, and a longer term means a shorter payback period but less lifetime savings.

While the interest rate for a solar loan will inevitably fluctuate, you are not completely at the mercy of the economy. Having a credit score between 680 and 719 can help qualify for a better rate, and higher than 720 will grant you access to the best rate. Acting now can also save you money. Interest rates for solar loans are expected to increase throughout 2024, so the sooner you lock in your interest rate, the lower it will be.

Tips for Finding a Solar Lender

1. Find one online 
2. Ask your solar contractor if they have a lender they recommend
3. Contact a Solar Advisor at soarenergy.com

Is Financing Right for You?

Any way you slice it, now is the best time to buy solar. The prices are the lowest they ever have been with low panel costs, high incentives and zero-down financing options. The biggest hurdle now is understanding how to buy solar panels and which ones are right for you. You can read more here about different types of solar panels. SOAR has resources to simplify this process for you. Contact us for more information or to get a Free energy assessment.