What is the best option to finance your solar installation?
Written by Andrew Sendy
Updated August 12, 2021
9 minutes read
Categories: Solar power, Solar financing
Installing a solar energy system saves money and helps the environment. By avoiding future utility bills, the system will pay for itself in a few years, but the up-front costs may be more than you have in available cash. Fortunately, there are many financing options available to residential owners.
How much do solar systems cost?
The cost of a solar system varies based on where you live, how much power you use, your local utility provider, and financing costs.
Tax credits and local government incentives will decrease the overall price. Sites like Solar-Estimate can help you get started. After you enter details about your location, roof size and type, sun exposure, and average utility bills, the Solar-Estimate website will calculate how many solar panels you need, the estimated cost with installation, monthly payments, and the amount of time it will take to recover your investment.
If you aren’t ready to enter all this information, we here at Solar Reviews have compiled the average cost of solar panels by state. After you click on your state of residence, then you can see the breakdown by the county to get a general estimate. At the time of writing, August 2018, this solar cost data on SolarReviews is about to be updated to use live offers from local solar companies in each city.
What do I need in addition to solar panels?
Solar panels are only 34 percent of the overall cost of installing a solar power system. Solar-Estimate.org breaks down the cost components as follows:
| Solar Panels | 34% |
| Solar Inverter | 10% |
| Racking | 3% |
| Additional System Components (cables, switches, etc.) | 3% |
| Installation Cost | 15% |
| Sales, Marketing, and Lead Generation Costs | 11% |
| Financing Costs | 10% |
| Permits and Inspection Fees | 2% |
| Installer Pre-Tax Margin | 12% |
The cost of professional installation is a substantial part of the cost of a solar power system.
It is possible to install a system yourself, but before you consider a DIY solution, check the rules for tax credits and local rebates.
Given the 30% federal solar tax credit about 90% of homeowners decide that a full-service solar installation, where the solar company takes care of all permitting, inspections and approvals is a better option than trying to learn all this to do a DIY solar project.
How many solar panels do I need to make it worth the cost?
You need the right number of solar panels to generate the amount of electricity necessary to zero out your monthly utility bill.
Solar-Estimate has a simple calculator to show you how many solar panels you will need. Their calculator is more accurate than others online and considers the federal solar tax credit and any local incentives in its solar cost and savings estimate.
If you are looking for an average number, we’ve created a chart showing the number of solar modules needed for the average household by state.
What are ways I can finance a solar installation in 2018?
There are two primary ways to finance the installation of a residential solar energy system: procuring a solar loan or signing a solar lease.
A secured or unsecured loan is the best option if you want to own your solar system.
The other option, a solar lease or power purchase agreement (PPA) allows you to rent the solar system so that you save money on utility bills without the responsibilities of ownership.
Consider the pros and cons of each financing option to find the one that best fits your needs.
Generally buying your panels, whether by paying cash, a solar loan, or a whole home refinance, will save you more than a lease or PPA.
What companies offer solar finance in my state?
We’ve put together a comprehensive list of banks, credit unions, and government programs that offer to finance solar systems in the table below.
Finding the right loan can be intimidating, so we offer reviews on lenders and can help you connect with the top lender in your area.
| Loan Originator | States Served |
|---|---|
| Admirals Bank | All |
| Alternative Energy Revolving Loan Program | MT |
| Alternatives Federal Credit Union | NY |
| AmeriFirst | All |
| Bank Five | MA, RI |
| Bank of Colorado | CO, NM |
| BlueWave Solar | L, MA, NC, NY, RI, SC |
| Celtic Bank | AZ, CA, CO, CT, HI, MA, NJ, NY, OR, UT, WA |
| Center for Energy and The Environment | MN |
| City and County of Honolulu | HI |
| City of Milwaukee | WI |
| City of Plano, TX | TX |
| City of Richland, Washington | WA |
| City of Tallahassee Utilities | FL |
| Clark Public Utilities | WA |
| Clinton Savings Bank | MA |
| CT Green Bank | CT |
| Dividend Solar | AZ, CA, CO, CT, DE, FL, GA, HI, IL, MA, MD, MI, MO, NC, NH, NJ, NM, NY, OR, RI, SC, TX, UT, VA |
| Eagle Community Credit Union | CA |
| Educational Employees Credit Union | CA |
| Elevations Credit Union | CO |
| EnerBank USA | All |
| Energy Finance Solutions | HI, MD, MI, NJ, NY |
| Energy Loan Network | CA |
| First Citizens' Federal Credit Union | MA |
| First Green Bank | FL |
| First New York Federal Credit Union | NY |
| Fort Collins Utilities | CO |
| Franklin First Federal Credit Union | MA |
| Green Sky Credit | All |
| GreenBiz Financial | CA |
| Greenworks Lending | CT, DC, MD |
| Hamilton County, Ohio | OH |
| Idaho Governor's OER State Energy Loan Program | ID |
| Investors Bank | NJ, NY |
| Iowa Energy Center | IA |
| Mass Solar Loan Program | MA |
| Matadors Community Credit Union | CA |
| Medallion Bank | All |
| Michigan Saves | MI |
| Mosaic | All |
| National Bank of Arizona | AZ |
| Naveo Credit Union | MA |
| Nebraska Energy Office | NE |
| North Brookfield Savings Bank | MA |
| Oregon Department of Energy | OR |
| Piedmont Electric Membership Corporation | NC |
| Provident Credit Union | CA |
| Puget Sound Cooperative Credit Union | WA |
| Redwood Credit Union | CA |
| Renew Financial | CA |
| San Antonio Credit Union | CA |
| San Diego Metropolitan Credit Union | CA |
| Santee Cooper | SC |
| SF Fire Credit Union | CA |
| Shrewsbury Federal Credit Union | MA |
| St. Lucie County Florida | FL |
| State Treasurer of Ohio | OH |
| Stoughton Co-operative Bank | MA |
| SunPower Corporation | All |
| SunLender Corporation | AZ, CA |
| UmassFive College Federal Credit Union | MA |
| Umpqua Bank | NV, OR |
| University of Virginia Credit Union | VA |
| Weymouth Bank | MA |
Will I need good credit to finance a solar system?
A higher credit rating will open more financing options, but plenty of banks will finance solar systems for the full spectrum of credit ratings.
Five years ago, it was difficult for those without an excellent credit rating to secure a loan, but new solar loan platforms like Dividend Solar, Mosaic, and Greensky have enabled most local solar installation companies to offer zero down financing to their clients.
If financing is a challenge, another option to participate in a solar community project where you can be a subscriber rather than an owner.
What incentives and discounts will help bring the cost of a solar system down?
The federal solar tax credit is the most publicized, but there are many incentives and discounts available at your state and local level.
Net metering, solar carve-outs, and solar feed-in tariffs can also help bring the cost of a solar system down. Your state may also offer Solar Renewable Energy Certificate (SREC) that requires power retailers to purchase a certain amount of energy from renewable sources including residential solar systems.
You can check to see if your state has an SREC here.
Are there state-run loan programs?
Many states already offer special loan programs to residents, and we expect more to do so shortly.
The Florida Public Service Commission (PSC) recently opened the door for zero-down financing in the Sunshine State.
How long does it take to pay off a solar system?
Most solar customers pay off the financing for a solar system within 4-10 years. It depends on how much you finance, the amount of energy your system produces, and any incentives or bonuses you apply to the balance.
Like any loan, you can always make extra payments on the principal to it off faster.
How long before I get my ROI?
The return on investment (ROI) of a solar energy system varies based on the size of your solar energy system and the amount of your pre-solar electric bill.
The PV Watts calculator estimates your ROI without asking for your contact information or even your name.
When you are ready for a more exact number, use our Solar Estimates calculator to find out how quickly your solar panels will take to pay for themselves.
Conclusion/Summary
Banks and investment companies are increasing their investments in residential solar loans.
As a consumer, you have many options to finance the installation of a residential solar energy system.
A combination of lower prices for solar panels and generous incentives make this a perfect time to harness the sun’s energy and decrease your utility bills.
