How to Finance Solar Panels
Updated
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Whether you're hoping to save money each month, decrease your eco-footprint, or increase the value of your property, solar panels -- and a personal loan -- can help. Here, we'll discuss the cost of solar panels, how the best personal loans work, and other options for covering the unwelcome expense.
According to EnergySage, the average U.S. home requires about 11 kilowatts (kW) of home solar to cover its electricity usage. That means homeowners pay just shy of $21,000 to install a system after federal tax credits.
Personal loans can be an ideal way to fund solar panels. Solar panel loans allow homeowners to pay off the cost of a solar panel installation over several years rather than paying out of pocket.
Get the best rates and terms to fit your needs. Here are a few loans we'd like to highlight, including our award winners.
| Lender | APR Range | Loan Amount | Min. Credit Score | Next Steps |
|---|---|---|---|---|
Rating image, 5.0 out of 5 stars.
5.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair = Poor |
Fixed: 8.99%-29.99% APR (with all discounts)
|
$5,000 - $100,000
|
680
|
|
Apply Now for Discover Personal Loan
Powered by Credible
Rating image, 5.0 out of 5 stars.
5.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair = Poor |
7.99% - 24.99%
|
$2,500 - $40,000
|
660
|
Apply Now for Discover Personal Loan
Powered by Credible |
Rating image, 4.0 out of 5 stars.
4.0/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair = Poor |
6.70% - 35.99%³
|
$1,000 - $50,000¹
|
300
|
A personal loan is money you borrow from a lender and repay with interest, typically in monthly installments. There are two types of personal loans -- unsecured and secured. An unsecured personal loan means you don't have to put up collateral for the loan. A secured loan requires you to put something of value up as collateral.
If you're considering a personal loan to purchase solar panels, it's wise to weigh the pros and cons.
Pros
Cons
Take the time to decide whether it's the right move to take out a personal loan to cover the cost of solar panels, based on these points.
As with all loans, the goal is to land the lowest possible interest rate. Here are some of the factors that go into deciding your rate.
The higher your credit score, the better your chances of landing a low interest rate. If your credit score is on the low side, consider taking steps to boost it before applying for a loan, such as paying down debt and checking your credit reports for errors.
Lenders routinely ask for proof of employment status and how much money you earn. When checking your income, they want assurance that you can afford monthly payments.
Taking out a secured loan means putting something of value up as collateral. However, it also means you risk losing the collateral if you miss payments. Still, because lenders know there's a valuable asset on the line (meaning less risk to them), you're likely to be offered a lower interest rate.
Lenders consider longer-term loans riskier because there's more time for things to go wrong. They offset the additional risk by charging a higher interest rate.
The workaround is to choose the shortest loan term you can afford to repay. Not only will you be rid of the loan sooner, but you'll likely pay a lower rate and less interest overall.
Here's how to apply for a personal loan.
High credit scores are rewarded with lower interest rates and loan fees. Before proceeding, check your credit score and order a copy of your credit report. If it's low, take steps to raise it.
Work with your contractor to learn how much money you'll need upfront to pay for your new solar panels.
Check several lenders, remembering that interest rates only tell part of the story. Also, look at the APR, which includes interest, fees, and other charges. If a potential lender conducts a hard credit inquiry during the prequalification process, your credit score may drop by a few points. However, making regular, on-time payments will help your score to rebound.
Complete a full loan application after you've shopped lenders and know which offers the lowest APR and best repayment terms. Once approved, read over the loan agreement and ask questions of the lender if there's anything you don't understand. Sign the loan agreement, await loan proceeds, and get ready to make your first payment approximately one month later.
Taking out a personal loan is not a one-size-fits-all solution. Here are two other options worth exploring.
The FHA's PowerSaver Loan from the Federal Housing Administration allows homeowners to finance cost-effective, energy-saving improvements, including solar and renewable energy systems in their homes. You can borrow up to $25,000 for as long as 20 years.
A home equity loan allows you to borrow money from the equity in your home to finance renewable energy. Because your property serves as collateral, you are likely to snag a decent interest rate. But remember: It also means the bank has the right to repossess your home if you fail to pay the loan.
A note about solar leasing: If you decide to lease solar panels rather than purchase them, ask questions -- lots and lots of questions. Here's why: You cannot claim solar tax credits when you lease solar panels. Despite what you might be told during a sales pitch, the company that owns and leases the panels gets all tax savings. Allowing someone to make money from you while also reaping the benefits of tax credits negates one of the most substantial benefits of going solar.
When deciding how to finance solar panels, you may be nudged toward one type of lender or another. Do not rush into a solar loan. If you decide to move forward with the purchase, let your salesperson know that you plan to rate shop first.
A difference of as little as one percentage point in interest can save you (or cost you) thousands over the life of your solar loan.
You decide how much to borrow. However, the more you borrow, the more interest you'll pay -- and those interest payments may be better used elsewhere, like building your nest egg.
Your credit score impacts whether you're approved for a loan and determines how much you'll pay in interest and loan fees. Boosting your credit score is not only a great personal accomplishment, but it can also save you thousands of dollars over your lifetime through lower interest rates.
According to Boston Solar, breaking even on upfront costs typically takes between eight and 12 years, although the numbers can vary dramatically. It depends on factors like how much you spend on the initial solar installation, the cost of electricity in your area, and the credits available to you.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Motley Fool Money does not cover all offers on the market. Motley Fool Money is 100% owned and operated by The Motley Fool. Our knowledgeable team of personal finance editors and analysts are employed by The Motley Fool and held to the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands. Terms may apply to offers listed on this page.
*Upstart Loan Disclaimer
¹ Your loan amount will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will qualify for the full amount. Minimum loan amounts vary by state: GA ($3,100), HI ($2,100), MA ($7,000).
³ The full range of available rates varies by state. A representative example of payment terms for an unsecured Personal Loan is as follows: a borrower receives a loan of $10,000 for a term of 60 months, with an interest rate of 18.60% and a 8.51% origination fee of $851, for an APR of 23.07%. In this example, the borrower will receive $9149 and will make 60 monthly payments of $258. APR is calculated based on 5-year rates offered in December 2024. There is no downpayment and no prepayment penalty. Your APR will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved.
*SoFi Personal Loan Disclaimer
Fixed rates from 8.99% APR to 29.99% APR. APR reflects the 0.25% autopay discount and a 0.25% direct deposit discount.
SoFi Platform personal loans are made either by SoFi Bank, N.A. or , Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. SoFi may receive compensation if you take out a loan originated by Cross River Bank. These rate ranges are current as of 3/06/23 and are subject to change without notice.Not all rates and amounts available in all states. See SoFi Personal Loan eligibility details at https://www.sofi.com/eligibility-criteria/#eligibility-personal. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, income, and other factors.
Loan amounts range from $5,000–$100,000. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 9.99% of your loan amount for Cross River Bank originated loans which will be deducted from any loan proceeds you receive and for SoFi Bank originated loans have an origination fee of 0%-7%, will be deducted from any loan proceeds you receive.
Autopay: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi.
Direct Deposit Discount: Direct Deposit Discount: To be eligible to receive an additional (0.25%) interest rate reduction on your Personal Loan (your “Loan”), you must set up Direct deposit with a SoFi Checking and Savings account offered by SoFi Bank, N.A., or enroll in SoFi Plus by paying the SoFi Plus Subscription Fee, all within 30 days of the funding of your Loan. Once eligible, you will receive this discount during periods in which you have enabled Direct Deposit to an eligible Direct Deposit Account in accordance with SoFi’s reasonable procedures and requirements to be determined at SoFi’s sole discretion, or during periods in which SoFi successfully receives payment of the SoFi Plus Subscription Fee. This discount will be lost during periods in which SoFi determines you have turned off Direct Deposit to your Checking and Savings account or in which you have not paid for the SoFi Plus Subscription Fee. You are not required to enroll in Direct Deposit or to pay the SoFi Plus Subscription Fee to receive a Loan.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Motley Fool Money does not cover all offers on the market. Motley Fool Money is 100% owned and operated by The Motley Fool. Our knowledgeable team of personal finance editors and analysts are employed by The Motley Fool and held to the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands. Terms may apply to offers listed on this page.
*Upstart Loan Disclaimer
¹ Your loan amount will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will qualify for the full amount. Minimum loan amounts vary by state: GA ($3,100), HI ($2,100), MA ($7,000).
³ The full range of available rates varies by state. A representative example of payment terms for an unsecured Personal Loan is as follows: a borrower receives a loan of $10,000 for a term of 60 months, with an interest rate of 18.60% and a 8.51% origination fee of $851, for an APR of 23.07%. In this example, the borrower will receive $9149 and will make 60 monthly payments of $258. APR is calculated based on 5-year rates offered in December 2024. There is no downpayment and no prepayment penalty. Your APR will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved.
*SoFi Personal Loan Disclaimer
Fixed rates from 8.99% APR to 29.99% APR. APR reflects the 0.25% autopay discount and a 0.25% direct deposit discount.
SoFi Platform personal loans are made either by SoFi Bank, N.A. or , Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. SoFi may receive compensation if you take out a loan originated by Cross River Bank. These rate ranges are current as of 3/06/23 and are subject to change without notice.Not all rates and amounts available in all states. See SoFi Personal Loan eligibility details at https://www.sofi.com/eligibility-criteria/#eligibility-personal. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, income, and other factors.
Loan amounts range from $5,000–$100,000. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 9.99% of your loan amount for Cross River Bank originated loans which will be deducted from any loan proceeds you receive and for SoFi Bank originated loans have an origination fee of 0%-7%, will be deducted from any loan proceeds you receive.
Autopay: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi.
Direct Deposit Discount: Direct Deposit Discount: To be eligible to receive an additional (0.25%) interest rate reduction on your Personal Loan (your “Loan”), you must set up Direct deposit with a SoFi Checking and Savings account offered by SoFi Bank, N.A., or enroll in SoFi Plus by paying the SoFi Plus Subscription Fee, all within 30 days of the funding of your Loan. Once eligible, you will receive this discount during periods in which you have enabled Direct Deposit to an eligible Direct Deposit Account in accordance with SoFi’s reasonable procedures and requirements to be determined at SoFi’s sole discretion, or during periods in which SoFi successfully receives payment of the SoFi Plus Subscription Fee. This discount will be lost during periods in which SoFi determines you have turned off Direct Deposit to your Checking and Savings account or in which you have not paid for the SoFi Plus Subscription Fee. You are not required to enroll in Direct Deposit or to pay the SoFi Plus Subscription Fee to receive a Loan.
