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Installing solar panels for your home is an opportunity to live more sustainability. It’s also a mark of independence, allowing you to generate your power rather than solely relying on the utility company’s grid. Solar panels are also a good investment in the long term, as they can pay for themselves over time by generating electricity from a renewable resource.
Solar panels are more affordable than ever, but the upfront cost is still steep for most people. The average solar energy system costs around $11,000 to $15,000. To cover that upfront cost, you can get a solar panel loan. Multiple lenders offer loans to people interested in installing solar energy systems in their homes.
Most of these loans are unsecured personal loans, which allow you to cover the expenses associated with installing solar panels while letting you pay it off over time — all while the panels save you from the cost of a typical energy bill.
Best solar panel loans
|Lender||APR range||Minimum credit score||Time to funding||Loan amount range|
|*Information accurate as of October 26, 2022. Please check the lenders for possible updated information.|
|Best Egg||7.99% – 35.99%||600||1-3 business days||$2,000 to $50,000|
|Discover||6.99% – 24.99%||660||Same day||$2,500 to $35,000|
|LightStream||5.73% – 19.99%||680||Same day||$5,000 to $100,000|
|PenFed||7.74% – 17.99%||650||Next business day||$600 to $50,000|
|SoFi||7.99% – 23.43%||660||Next business day||$5,000 to $100,000|
|Upgrade||7.46% – 35.97%||560||3-4 business days||$1,000 to $35,000|
Best for flexible options: Best Egg
Overview: Best Egg launched in 2014 and has loaned more than $6 billion in personal loans. It is an online platform focused on making personal loans available quickly. While it is new, Best Egg has a strong reputation as a lender.
Why we chose this lender: Best Egg offers some of the most variety in loan terms to fit an individual’s needs. It extends loans to people with lower credit scores and is willing to look at factors outside of credit score to determine if it is willing to lend to a borrower. However, Best Egg does charge fees, including origination loans and return fees for any payment that isn’t completed.
Best for quick approval: Discover
Overview: Discover is one of the largest financial services companies in the United States. It has been in operation for nearly four decades. Discover offers banking services, credit cards and personal loans. It operates its card network for processing transactions.
Why we chose this lender: Discover’s lending platform offers personal loans for solar panel installations that do not require origination fees. Approval is quick, but Discover focuses on smaller loans — capping at $35,000. Discover is focused on borrowers with high credit scores, making it a good option for those with a long and reliable credit history.
Fees: $39 late fee
Best for no fees: Lightstream
Overview: Lightstream is an online lender that launched as the result of a merger between SunTrust Bank and Truist Bank. It offers unsecured personal loans for various purposes through its online platform. Lightstream focuses on borrowers with strong credit history.
Why we chose this lender: Lightstream offers some of the most borrower-friendly terms available. It has low APR and flexible terms for up to seven years. Lightstream also does not charge any fees, and funds can be available as soon as the same day as applying.
Best for small loans: PenFed
Overview: PenFed is short for Pentagon Federal Credit Union. It is the third-largest credit union operating in the United States, managing more than $25 billion. It offers various financial services, including credit and debit cards and personal loans.
Why we chose this lender: PenFed is a solid option for those looking for a smaller loan to get started setting up their solar system. With pre-qualification and secured loans available, it is a solid option for those looking for better loan terms. You will have to become a member of PenFed to secure a loan, but the membership fee is a low barrier to entry.
- Late fee: $29
- Returned payment fee: $30
- Membership fee: $5
Best for large loan amounts: SoFi
Overview: SoFi is a relative newcomer to the world of finance but is already a significant player in the space. It launched in 2011 to provide accessible personal loans to people. SoFi manages more than half a billion dollars and offers various financial services, including investment vehicles and personal loans.
Why we chose this lender: SoFi offers loans with significant variance in the loan amount, offering up to $100,000. Its loans have reasonable APR, with terms of up to 7 years available. It requires a good credit score, but SoFi offers hardship programs for borrowers facing financial challenges. SoFi does not charge any additional fees on its loans.
Best for people without excellent credit: Upgrade
Overview: Upgrade is an online bank that launched in 2016 to offer online financial services to consumers. It specializes in fixed-rate personal loans and lines of credit.
Why we chose this lender: Of the companies that offer solar panel loans, Upgrades is one of the few that serves those with less-than-perfect credit. It offers flexible monthly payment rates and debt consolidation options, making it a good choice for those working on improving their financial standing. The trade-off is lower loan amounts and higher APRs, but the loans are available to more diverse financial backgrounds.
- Origination fee: 1.85% to 8%
- Late Fee: $10
- Failed payment fee: $10
What to look for in a solar loan
When looking for a solar loan, there are a number of factors that you should be paying close attention to. Your needs will vary based on your financial situation and the type of solar energy system you want to install. Still, the loan conditions to look for remain the same:
- APR and loan terms: Your actual cost when taking out a solar panel loan is dictated by the APR and the loan length. A higher APR and longer loan term will make your total cost higher, though the cost will be spread out over more payments so that the financial stress might be lower.
- Consider solar-specific loans: Personal loans can be used for various purposes, including installing solar panels. But solar-specific loans may offer additional incentives, including help with financing from the panel manufacturer.
- Factor in your savings: The goal of installing solar panels, aside from achieving sustainability and reducing carbon footprint, is saving money on your electric bill. Make sure you factor in that savings into the math when considering a loan — and remember you may be able to sell excess energy to the utility company in some cases, too.
Solar panel tax benefits
Another factor to consider when securing a loan for installing a solar energy system is the tax benefits available at the state and federal levels. For federal taxes, an incentive program allows you to deduct 30% of the system’s cost if installed between 2022 and 2032. It will decrease to 26% in 2033 and 22% in 2034.
Similarly, states offer a number of solar incentives designed to encourage homeowners to install solar panels. This will vary by state but typically allow you to deduct between 10-20% of the cost of your solar energy system.
Other types of solar loans
Aside from getting a loan to cover the cost of your solar panels, several alternatives are available to secure the funds needed to fund the project.
- Cash-out refinance: If you have equity in your home, you can undergo a cash-out refinance, which requires changing the terms of your remaining mortgage while allowing you to turn your existing equity into cash. You will have to pay closing costs on refinancing, which can be steep depending on how much you have left to pay.
- Credit card: You can pay for the cost of your solar panels on a credit card. However, this payment will be subject to your credit card’s terms, which likely means a high APR.
- Equipment lease: Some companies allow you to lease solar panels, paying monthly without needing a large up-front payment. The downside is that you don’t own the panels, can’t claim tax incentives, and likely will be paying off the lease for up to 25 years.
- Financing from solar company: Some solar companies offer financing options that cover the installation cost. These terms usually offer much lower APR but have much longer repayment periods. Interest rates may add up over time.
- Home equity loan: A home equity loan is a secured loan in which you borrow against the value of your home. It offers a lower interest rate because your home is offered as collateral, but you do run the risk of losing your home if you fail to make payments.
- Home equity line of credit: Similar to a home equity loan, a home equity line of credit allows you to borrow against the value of your property. However, instead of a lump sum, it is made available as a line of credit that is available as needed. Rates for this may vary and can be higher than a loan.
Frequently asked questions
To calculate how much you will save with solar panels, consider the upfront cost, then factor in the interest rate you’ll be paying over the loan term to determine your true cost. Subtract the state and federal incentives available.Once you’ve accounted for that savings, subtract the projected savings from your monthly energy bill. This should help you determine the break-even point and when you will start seeing savings in a meaningful way.
To determine how many solar panels you need, figure out your household’s energy requirement. (The average U.S. household uses 886 kWh per month.) Then determine how many solar panels will be required to generate that much energy. Most panels will provide an estimated amount of watts it produces in ideal conditions. Divide your target energy generation by the amount each panel generates to determine how many panels you need.
The amount of time it will take to make back the upfront cost of installing solar panels will depend on the system you install. On average, U.S. homeowners break even in about eight years.