Ways to Finance Solar Panels for Your Home

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

Updated on Tuesday, February 19, 2019

iStock

Solar panels absorb the sun’s rays and convert them into heat or electricity. But they are not cheap. According to the Center for Sustainable Energy (CSE), an average residential solar system costs between $3 to $5 per watt — or $15,000 to $25,000 before tax credits and incentives.

While solar panels are expensive, they may be worth the investment as they can save you money on energy bills. Your location, electric bill, roof and the size of your system will all play a role in how much money you can save.

The average payback period for a residential solar electric system, according to the CSE, is between six and nine years, depending on the cost of your system and how much you can save on utility bills.

If you’re considering installing solar panels but don’t have the cash to pay for them, know that there are a variety of financing options available.

Financing solar panels with a personal loan

A personal loan is one way you can pay for solar panels in your home. Here’s a brief overview of the pros and cons of financing solar panels with a personal loan.

Pros

  • Fixed interest rates: Personal loans usually come with fixed interest rates, so you can calculate how much money you’ll spend on your solar panels. You won’t have to worry about the surprises that variable interest rates often bring.
  • No collateral required: A personal loan may be a good option if you don’t want to borrow against your home since it doesn’t require any collateral.
  • Plenty of time to pay: Unlike other financing options, personal loans can give you at least a year or more to pay off your solar panel project. This is great news if you’d like smaller, more manageable monthly payments.

Cons

  • Higher interest rates for lower credit scores: If you have a lower credit score, you can expect a higher interest rate with a personal loan. If your credit is particularly low, you may end up paying as much in interest as you would with a credit card.
  • Origination fees: Some personal loans come with origination fees, which are intended to cover the cost of loan processing. In many cases, origination fees are between 0% and 6% of the total amount borrowed.
  • Prepayment penalties: Some personal loan lenders charge prepayment penalties to borrowers who pay off their loans early.

How to find personal loans for solar panels

If you’d like to secure a personal loan to pay for solar panels, it is in your best interest to shop around. MagnifyMoney’s personal loan marketplace is a great place to start. It can allow you to compare the various personal loan lenders that are available. Here’s a closer look at two of the lender options.

LightStream

LightStream is an online lending division of SunTrust Bank. It offers rates on fixed loans between 3.99% and 19.99%, and does not charge origination fees. It is an option if you have excellent credit and are searching for a personal loan to fund your solar panel project.

APR

3.99%
To
19.99%*

with AutoPay

Credit Req.

Not specified

Terms

24 to 144*

months

Origination Fee

No origination fee

SEE OFFERS Secured

on LendingTree’s secure website

Lender Disclosure

LightStream is the online lending division of SunTrust Bank.... Read More


*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 3.99% APR with a term of 3 years would result in 36 monthly payments of $295.20.

LendingClub

LendingClub has been around for over 10 years. The APR range for personal loans via LendingClub is 10.68% to 35.89%, and the origination fees are between 2.00% - 6.00% of the total amount borrowed. LendingClub offers a quick application process, and may be a good choice if you have a lower credit score, though their minimum credit requirements are not specified.

APR

10.68%
To
35.89%

Credit Req.

Not specified

Terms

36 or 60

months

Origination Fee

2.00% - 6.00%

SEE OFFERS Secured

on LendingTree’s secure website

LendingClub is a great tool for borrowers that can offer competitive interest rates.... Read More

3 other financing options for solar panels

If you decide that paying for solar panels via a personal loan is not a good route for you, there are other financing options you can consider. Let’s dive deeper.

1. Fannie Mae’s HomeStyle® Energy Mortgage

Fannie Mae’s HomeStyle Energy Mortgage is designed to help borrowers improve the comfort and efficiency of their homes. If you decide to install solar panels in your home, you’ll be creating a more energy-efficient space, which could qualify you for the program.

Pros

  • Convenience: With the Fannie Mae HomeStyle Energy Mortgage, you can roll the costs of your solar panel project into your mortgage.
  • Affordability: You can save money with possible tax credits and rebates and interest rates that are lower than other forms of financing.

Cons

  • Loan limits: The Fannie Mae HomeStyle Energy Mortgage puts limits on loan amounts as it only allows you to use up to 15% of the “as completed” value of your property for new energy improvements.
  • Refinancing required: If you are a current homeowner, you’d have to go through the process of refinancing your home to be eligible.

2. Home equity line of credit (HELOC)

A HELOC works similar to a credit card. It can give you the opportunity to borrow up to a certain credit limit and pay back the amount borrowed with interest. With a HELOC, you can withdraw payments for your solar panels as often as you’d like.

Pros

  • Flexibility: You can use the HELOC whenever you need to do so. If you think you’ll want to invest in extra home improvement projects besides your solar panels, the flexibility of a HELOC may be good for you.
  • Minimal-to-no fees: Some lenders offer HELOCS with minimal-to-no application fees and closing costs.

Cons

  • Unpredictable payments: HELOCs come with adjustable-rate loans, meaning that if interest rates increase, your monthly payments will as well.
  • Penalties: Some lenders penalize borrowers for paying off their loan early or canceling it.

3. Home equity loans

Home equity loans are often referred to as second mortgages. If you opt for a home equity loan to fund your solar panel project, you can borrow a lump sum of cash upfront depending on the value of your home and repay the loan over time via fixed monthly payments.

Pros

  • Lower cost of borrowing: Since home equity loans offer fixed interest rates and lump-sum amounts, you can determine how much your solar panels will end up costing and won’t have to worry about overspending.
  • Lower interest rates: Compared to personal loans and credit loans, home equity loans offer lower interest rates that can save you money in the long run.

Cons

  • Putting your home at risk: If you default on your loan, your home may be foreclosed on.
  • Closing costs and fees: You’ll likely be required to pay closing costs and fees when taking out a home equity loan for your solar panel project.