Until recently, solar panel shoppers had only two financing options: a cash purchase or a solar lease (or PPA). Recently, a third option—the solar loan—has emerged. The number of solar loan products designed for financing home solar panel systems is increasing dramatically. This is great news. With more options for financing your solar panel system, chances are better than ever that you will find a financing option that is perfect for your needs and financial objectives.
MANY DRIVERS, MANY PROVIDERS
Several factors are driving the increased availability of residential solar loans. For one, banks –local community providers as well as big regional or national banks–are becoming increasingly familiar with solar photovoltaic (PV) technology. In the process, they are growing more and more comfortable offering solar loans to homeowners and businesses. Another important trend is the revival of real estate lending. Five years ago, the US was in the throes of a national banking crisis and a subsequent real estate market crash. Market conditions made it next to impossible to secure a home equity loan to finance home improvement projects such as solar–as home values have risen, home equity levels also have risen, and banks are loosening the reigns on their lending programs.
A third trend is the steep drop in solar power system costs in recent years. For most homes, a solar panel system likely will cost between $10,000 and $15,000 (after tax credits, rebates and incentives)—half of what they cost several years ago. At half the price, financing to own your solar power system is a much more reasonable proposition.
There are several other institutions, in addition to banks, offering solar loans:
- Solar panel manufacturers offer loans, often through their solar installer networks.
- Credit unions of all sizes and all over the country are rolling out solar loans for homeowners. Subject to different regulations than banks, credit unions do not pay income tax, which often allows them to offer consumers lower-cost solar loans.
- National lending institutions offer specialty loan products tailored to residential solar panel systems. A few of the biggest companies include Green Sky Credit, Admirals Bank, Enerbank, WJ Bradley, and Digital Federal Credit Union. Some of these firms offer solar loans insured by the Federal Housing Administration (FHA Title 1 Home Improvement Loans), which allow for superior loan terms.
- Several public-private partnerships now offer solar loan programs. City and state government agencies are partnering with private lending institutions. These partnership programs use public money and are able to offer more attractive terms such as lower interest rates and no fees. Some of these loans are specifically geared to residential solar power system installations while others have a broader focus on home energy improvements in general.
- Utilities offer loan programs that allow homeowners to finance solar energy systems and then repay the borrowed amount through their electric bills.
- Several municipalities are offering PACE (Property Assessed Clean Energy) loans for residential and commercial solar power systems.