Thinking about going solar but worried about the expensive installation? You are not alone! Solar panel financing can make it easier for homeowners to switch to clean, renewable energy, and they don’t have to pay thousands upfront!
If you are thinking about getting solar panels for your home, solar panel financing could be just the solution you have been looking for. Whether you want to lower your energy bills or carbon footprint, financing options can help bring your dream of solar energy for your home more into reach.
With solar panel financing, not only are you not paying the whole cost of the system upfront, but you can break the cost among somewhat smaller monthly payments to make it more affordable and manageable. In this blog, we will explain the different methods you can use to finance your solar panels and what you should keep in mind before you make your decision.
If you want to save on energy bills and reduce your environmental footprint, continue reading to find out how solar panel financing can help.
What is Solar Panel Financing?
In short, solar panel financing allows you to install solar panels at the top of your home without having to pay for the liability of the entire system upfront. Instead, you pay for the installation through various financing options like loans, leases, or power purchase agreements (PPAs), so you can benefit from solar energy without having to worry about an upfront cost.
With solar panel financing, you can have a system put on your roof and bid farewell to high energy bills, and sometimes your monthly payment is equal to or less than the bump in energy bills from your solar system. This makes the transition to renewable energy simple and can help you reduce your reliance upon the expensive current from your utility.
Why Solar Panel Financing Makes Sense
Switching to solar energy is a big decision, but financing makes it far more achievable. Here’s why it’s worth considering:
- Affordable Upfront Costs: No need to shell out thousands all at once. Financing lets you pay in smaller, manageable monthly instalments, fitting solar into your budget.
- Instant Savings: Once your panels are installed, your electricity bills can drop significantly. In many cases, the savings offset your financing payments, so you’re paying for your system while cutting costs.
- Government Incentives: Programs like the PM Surya Ghar: Muft Bijli Yojana offer subsidies covering up to 40% of installation costs and low-interest loans, reducing your financial burden.
- Boosted Home Value: Solar panels can increase your property’s market value, making your home more attractive to buyers if you decide to sell.
These benefits make solar financing a win-win, helping you save money and contribute to a greener planet.
Different Solar Panel Financing Options
There are a few ways you can finance your solar panels, each of which has its own features and benefits based on your finances and goals. Let’s go over the most common types of solar panel financing:
1. Solar Loans
A solar loan operates like a conventional loan, where you take out a loan to finance your solar system and subsequently pay it back over time. After the loan is repaid, you completely own the solar panels and can continue saving on your energy bills without making any additional payments.
Why Choose a Solar Loan?
- Full Ownership: A solar loan makes you the owner from day one, which means you can take advantage of tax incentives and energy savings.
- Low Interest Rates: Many solar loans have low interest rates, and there are even loans that have 0% interest available if certain criteria are met.
- Flexible Terms: You can choose loan terms that work with your budget. In general loan terms run anywhere from 5 to 25 years.
Things to Keep in Mind:
- Monthly Payments: A solar loan allows you to spread the cost out over time, but you still must make monthly payments while the loan is in place until paid off.
- Qualification: You need to qualify for a loan, which means there are credit criteria you need to meet to qualify for a solar loan.
2. Solar Leases
With a solar lease, you pay a fixed monthly fee to a company to rent (instead of buy) a solar system. The Leasing Company typically handles any maintenance and repairs, so you don’t have to think about it!
Why Choose a Solar Lease?
- No Upfront Cost: With a lease, you will not pay out of pocket for the solar panels, which is great if you do not have the upfront savings available.
- Maintenance-Free: You will not have to maintain, repair, or question warranties as the leasing company takes care of the upkeep and repair of the system as part of the agreement
Things to Keep in Mind:
- No Ownership: You are “renting” the systems with a lease, which does not provide any benefits from tax credits or rebates.
- Long-Term Commitment: Leases typically come with long contract terms, which is an obligation of 20-25 years, so be sure that you are comfortable with the length of the financial commitment.
3. Power Purchase Agreements (PPAs)
A PPA is like a solar lease, but instead of paying a fixed monthly dollar amount, you pay for the solar energy that the system produces. The price you pay is typically lower than what you would pay for electricity from your utility, so you will be saving money on your electric bills.
Why Choose a PPA?
- Pay for Energy, Not the System: With a PPA, you pay for the energy provided, not the system. This can be a great way to save on your monthly electric bill.
- Immediate Savings: Since the energy you are paying for is often cheaper than what you would pay for your utility, you start saving money right away!
Things to Keep in Mind:
- No Ownership: Because you do not own the system with a PPA, you will not have access to any government rebates or tax incentives that owners can access.
- Long-Term Contract: You should review the PPA closely because you will enter into a long-term contract, like a lease, usually for 20 – 25 years.
4. Incentives and Rebates
Numerous governments and utility companies provide various incentives and rebates to help lower the cost of solar installations. Incentives and rebates can include a federal tax credit, a state tax credit, and utility-based rebates, which could help mitigate your upfront costs or lower your financing payments.
What to Look For:
- Tax Credits: See if you qualify for any federal and/or state tax credits. They could lower your solar system’s cost significantly.
- Utility Incentives: Some utilities offer a rebate or reduced rates for customers who install solar panels, so it’s worth checking with your local utility.
How to Choose the Best Solar Financing Option
Choosing the best solar financing option depends on your financial situation, long-term goals, and preferences. Here are some steps to guide you:
- Assess Your Budget
- Determine how much you can afford to pay each month. If you’re comfortable with higher monthly payments, a solar loan might be ideal since it allows you to own the system outright. If you prefer lower payments, a solar lease or PPA could be more suitable.
- Consider Long-Term Benefits
- Solar is a long-term investment. If you plan to stay in your home for many years, owning the system through a loan can provide greater savings and benefits over time, as you’ll own the panels and can claim all incentives.
- Take Advantage of Incentives
- Look into available rebates, tax credits, and other incentives that can reduce the overall cost of your solar system. These can make financing more attractive by lowering your initial investment or monthly payments.
- Read the Fine Print
- Before committing to any financing option, thoroughly review the contract. Pay attention to interest rates, loan terms, maintenance responsibilities, and any fees that might affect the total cost.
Common Mistakes to Avoid
Even with the hope of having the best intentions, it is easy to mess up solar panel financing. Here are a few mistakes to avoid:
- Not Shopping Around: Don’t just take the first financing you come across. Look for comparisons between lenders, rates, and terms to ensure you’re getting the best deal.
- Ignoring the Fine Print: Please be sure you have read through the entire contract. Little specifics like fees, interest rates, and coaching responsibilities can have an enormous impact.
- Not Factoring in Maintenance: If you select a loan to purchase or even lease to own panels, now you’re responsible for maintenance. If you choose that route, make sure you consider this.
Conclusion
As solar panel financing has become more widely available and affordable, accessing renewable energy is becoming easier than ever. Thanks to PM Surya Ghar: Muft Bijli Yojana, now homeowners can avail of governmental subsidies with favourable low-interest financing options, all of which help bring the initial installation amount down significantly.
We all share the burden of increasing electricity bills and are equally concerned about the need for a cleaner environment, so at this particular time, it is worth considering investing in solar energy now!
For residents of Guwahati, Assam, and Northeast India, Solar Prabha will help you at each step through expert consultation, and effortless installation coupled with financing options that fit your budget, and we offer an additional 2-year warranty on rooftop solar up to 3kW, so you will have peace of mind with every unit of energy you produce.
Contact Solar Prabha at +91-7099030047 to learn more about your customised solar and financing options.
