What's Up With Solar Financing?
I’m sure you’ve seen the ads from various solar installation companies promoting “$0 Down Financing” and “0% Interest Rate” while questioning the validity of these claims. Of course you did! It sounds too good to be true. But in reality, solar financing has come a very long way and the more competitive the industry becomes, the more customers like you will benefit.
Interest Rates & Loan Terms
Interest rates vary widely, as they do for home and car loans, and are based on your credit score. Typically, a credit score of 650 or above will give you access to the best rates.
From 0% to 6.99%, interest rates will typically decrease with shorter loan terms and increase with longer terms, though many companies offer low rates with a variety of term lengths. What you decide to do will depend on your financial situation and this should be a conversation you have with your solar installer.
You can also ask for multiple quotes with different rates and term lengths in order to make the best decision for you, but an experienced solar consultant will be able to present the best option after a discovery call about your goals and preferences.
Sunlight Financial, Dividend Solar, Sungage Financial and Goodleap are four of the most popular solar financing companies in the business. Most solar installers will use one of these four when securing your solar financing.
There are options for those with a credit score under 650 as well, so make sure to ask your energy consultant about all of your options. Our job is to get you qualified!
You can also choose to finance through your personal bank or a home equity line of credit (among other ways). The Fannie Mae HomeStyle Energy Program (that you can read about here) allows you to roll the cost of your solar energy system into a home refinance or new home purchase.
You can also read about the cost of a solar panel system here!
Solar Tax Credit
Whatever type of financing you choose, you will have the opportunity to put the 26% tax credit towards the total cost of your system to keep your payments low. Typically, the monthly payments you begin with (presented on your quote) will be based on the assumption that you will put the tax credit back into the loan. This is called “paying it down.”
If you decide to use your tax credit for other purposes, your solar installer should always give you the increased monthly payment amount that will take effect if your tax credit is not applied towards the loan. Make sure the higher payment amount is still affordable for you before signing!
In most cases, you have 18 months to apply the credit towards your loan, but if your tax liability is not large enough to get the total amount of the credit in your pocket you may not be able to put the total credit towards your loan, so keep that in mind. It may take a few years to get the payments back down to the quoted amount. Read here for more information on the solar federal tax credit!
Residential solar financing has come a long way in a short amount of time, leaving us to reap the benefits. Taking on another loan may sound intimidating, but when you realize that your utility bill is a fact of life (like taxes) it’s really a no-brainer. Luckily, a solar loan has an end date, after which you will have totally free energy!
Utility bills increase year-over-year by an average of 4% and your solar loan payments can be lower than your average bill right off the bat. Take back your energy independence and use a solar loan to finance your savings!