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How solar loans can help you finance your solar energy system

How solar loans can help you finance your solar energy system

Solar systems can be expensive. It is important to understand how to navigate your financing options and how solar loans make these systems a smart investment.

What are solar loans?

Solar loans are a great option for financing a solar energy project for your home or business. If you lack the capital to pay upfront in cash or prefer to own the system, consider a solar loan. Like other home improvement loans, solar loans allow you to borrow money from a bank to purchase a solar system and make monthly payments to pay off the balance of the loan plus some additional interest.

Key Considerations:

The Basics

When evaluating a solar loan, important basic considerations are the interest rate, duration of the loan, and down payment amount. All else being equal, a lower interest rate results in lower monthly payments and less total interest paid over the duration of the loan. A longer loan duration also results in lower monthly payments but can increase the total interest paid. As for the down payment, paying more initially can reduce the interest rate and duration of the loan. Zero or low down payment loans exist for those who may not be able to pay a significant portion upfront.

Secured Versus Unsecured Loans

Another important consideration is the type of solar loan. Loans can be either secured or unsecured. For secured loans, borrowers put up collateral that can be used as payment should the loan not be paid back. In the case of solar loans, the solar system itself or your home are commonly used as collateral.

An advantage of secured loans is that they typically offer more favorable terms to borrowers. They typically feature lower rates as they are less risky for lenders compared to unsecured loans. On the other hand, unsecured loans generally have higher rates but do not require collateral. These loans are riskier for lenders and are therefore usually offered to those with good credit.

Advantages of Solar Loans

There are two major advantages to financing via a solar loan. First, they allow you to spread out the cost of the solar system over the course of many years. This makes potentially expensive solar systems more accessible. It also allows you to start saving money immediately. In many instances, the monthly payment on the loan is less than the money saved on each month’s energy bill.

Alexander Hood Sales Energy Specialist

“The goal is to provide a variety of terms and options so that any homeowner can power their property with solar for $0 down, with the strong possibility of paying less for your monthly solar payments than you currently pay for your electric bill.” – Alexander Hood, IGS Energy Sales Specialist

The second main advantage to solar loans is they result in you owning a valuable solar energy system. After the loan is completely paid off, your realized savings will increase as you no longer must make monthly payments but will continue to save on energy for years to come. Furthermore, owning the system adds equity to your property. According to the Solar Energy Industries Association, adding a solar system to a home boosts its value by 4.1%, offsetting a major portion of the initial cost.

The upfront savings and long-term payoff make financing with a solar loan a smart financial decision. Start exploring financing options with our capital partners today!