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Solar technology is highly efficient and reliable, giving your family peace of mind no matter the conditions outside your home. Solar energy systems also boast significant financial benefits, reducing or eliminating household electricity bills and saving consumers substantial money over time.
However, reaping the savings benefits of renewable energy requires some upfront financial investment. Luckily, plenty of financing options are available.
Read on to discover your perfect path toward greener, more affordable home energy.
What Are the Different Solar Financing Options?
With so many options on the market, purchasing a solar energy system for your home can be complicated. However, the sundry paths available mean there are ways forward for varying economic situations, making renewable energy an accessible option for many families.
Here are some primary solar financing options and their benefits and drawbacks you should consider.
Cash Purchase
Some people pay for the entire solar energy system outright, often called a cash purchase.
Pros
- High Return on Investment: When you pay in full upfront, you don’t have to pay any interest on a loan over time. That means that, over time, you will save more money than if you had a monthly payment for your energy system. Paying in cash makes an already smart economic decision even smarter.
- Total Control: When you pay in cash, you become the sole owner of the technology. That means that you are not beholden to other stakeholders as you make decisions about your home or the resale of the products. You can even make changes to the system, like utilizing EcoFlow Rigid Solar Panels such as the EcoFlow 400W Rigid Solar Panel to ramp up its efficiency.
- Lower Installation Price Often, paying in cash will earn a buyer discounted installation fees, amounting to even more savings in the long run. With those savings, you can splurge on other renewable energy solutions, like EcoFlow Solar Generators, that allow you to take eco-friendly power with you on the go.
Cons
- Upfront Payments Are Not Accessible for Everyone: Depending on the cost of solar panels in your area that meet your needs, you may be unable to swing paying out-of-pocket for the purchase upfront. Even with a great deal on a home renewable energy system, it may be tough for most households to pay the entire cost in one fell swoop.
If you’re determined to pay in full upfront but do not have enough cash to buy a large solar system, consider buying a smaller, less-expensive renewable energy solution, like the EcoFlow DELTA 2 Max + 220W Solar Panel.
- Buyers May Not be able to Take Advantage of Full Tax Credit: Typically, you cannot save more with a tax credit than you would pay in taxes for a given year. That means that you must have a high tax liability to be able to take full advantage of the available tax credits.
Who Is This Option Suited To?
This option best suits households with a hefty chunk of cash to spend on a solar energy system. It’s also a smart move for those who have high tax liabilities to ensure you get the most bang for your buck when it comes to tax credits.
Solar Loans
As renewable technology has emerged, so have diverse financing options. Solar loans are a common approach to purchasing renewable energy technology systems like other types of loans.
Pros
- Increased Access to Solar Energy: Regardless of how much solar panels for your house cost, choosing clean energy is accessible thanks to solar loans. The ability to pay off a home renewable energy system’s cost month-to-month means you don’t need all the money upfront to cover the bill.
- Highly Convenient: Getting the funds together to make a big purchase isn’t the only hassle. In addition, you often have to shop around to find financing options. This process can be an immense waste of time and energy in an already chaotic time. However, home solar system installers have made it easier than ever to choose green energy by partnering with lenders and offering financing options directly.
This means that you only need to vet and work with a solar installation company, not a third-party lender.
- Fixed-Rate Over Time: When you opt for a loan, you know ahead of time what your monthly costs will be thanks to fixed-rate payments. This allows you to plan ahead, ensuring you always have the funds to pay when an installment is due and reducing financial stress.
- You Own the System: Even though you didn’t pay for it upfront, you are still the renewable energy system owner when you opt for a solar loan. This means you can use rebates, tax credits, and other local incentives to invest in renewable energy technology.
Cons
- Lower Overall Savings: Paying interest is a part of almost any loan repayment plan, and solar is no different. Since you’ll pay interest on your loan, the overall savings from your investment may not be as high. That said, you will still reduce your electricity bill and save money by switching to solar– even with an interest payment.
- Increasing Interest Rates: Lately, interest rates across the United States have been high, equating to higher overall costs for financed purchases– including renewable energy technology. Additionally, some lenders require homeowners to pay a set amount, often 30%, of the price within 18 months of purchase because the federal solar tax credit covers 30% of the cost. Your loan payments will likely spike if you can’t pay 30% within the first 18 months.
- Difficulty Selling Your Home: Paying for the renewable energy installation in full can add immense value to your home’s resale value. However, if you still need to finish paying off the loan, it may be challenging to sell your home.
Who Is This Option Suited To?
Solar loans are best suited for people who care about choosing renewable energy and want to cut down their electricity bill but may not be able to pay for the whole cost out of pocket. Solar loans are especially worth it when living in an area with high energy costs, as you will see higher savings.
Solar loans are also a safe choice for people who don’t intend to sell their home for the next decade, as that gives homeowners ample time to pay off the loan before putting the house on the market.
Solar Leases and PPAs
Just like leasing an apartment, leasing solar means you utilize the system while someone else remains the owner. A power purchasing agreement (PPA) is essentially a long-term lease between a homeowner and the company providing solar services. Consumers usually pay for the renewable energy produced or pay a flat monthly fee.
Pros
- No Upfront Costs: While not technically free, installing renewable energy technology on your home with a PPA generally involves small or no upfront costs. That makes solar leases a great option for those who don’t have cash on hand but want to use clean energy.
- Accessibility and Ease: Generally, the PPA company handles the system’s maintenance entirely, saving the homeowner stress and worry about upkeep. Plus, the ease of service and low cost make this an accessible renewable energy option for anyone—even those who may not qualify for a loan.
- You Save on Electricity: Even though you don’t own the system, you’ll still save a lot on electricity.
Cons
- Fewer Savings Than Other Financing Options: You will likely save less over time with a PPA than with cash purchases or solar loans. However, savings can still be significant as you will pay dramatically less for electricity.
- You Can’t Claim Tax Credits or Rebates: Since tax credits and incentives are targeted toward owners of solar energy systems, you won’t benefit from these programs with a PPA. Instead, service providers and installers can utilize available tax credits.
- Difficulty Selling Your Home: Not all homebuyers are willing to take over a PPA or lease, meaning selling your home could be challenging. Be mindful of your future plans when entering into a lease agreement, and only look for PPAs that fit your timeline.
Who Is This Option Suited To?
Solar leases are best suited for people who want to utilize renewable power and save on electricity but don’t have cash on hand or energy to commit to upkeep. They also are a great option for those who may not qualify for a loan.
Tax Credits, Rebates & Incentives for Solar
Solar tax credits are available for many buyers, making renewable energy even more affordable. Through the Federal Solar Tax Credit, you can save up to 30% of the cost of the equipment and installation. Additionally, many states and municipalities offer rebates or other financial incentives to invest in renewable energy.
Do your research before you buy, and don’t sleep on any available savings.
Frequently Asked Questions
Solar financing is a great option for anyone who wants to invest in renewable energy but needs more cash upfront to cover the cost. Typically, financing is handled by the solar installer provider directly. Whether you opt for a PPA or a solar loan, solar energy companies can walk you through the process. It is always a good idea to shop around before committing to one company to ensure you get the best deal.
Generally, solar loans are fairly flexible. You can pay anywhere from 0% to 100% as a down payment, and the length of the term varies, meaning the interest rate will also vary. However, interest rates typically range from 4% to 7%.
Since loan terms vary, there is no one set amount of time to pay off a solar loan. Many loans offer penalty-free pre-payments, meaning you can pay off the loan at any time without a fee. On average, paying off a solar loan takes 8 to 20 years.
Final Thoughts
With pros that vastly outweigh the cons, solar energy is an affordable, efficient choice for anyone who strives to live greener and save money while doing it. A variety of financing options make it easier than ever for households of any economic standing to make climate-friendly choices. No matter your needs, diverse financing options mean you can choose the best solar power system for your home today. Once your home solar finances are in order, check out EcoFlow’s incredible line of products for renewable energy on the go. EcoFlow DELTA Series Solar Generators come with high-quality EcoFlow Solar Panels, making greener living a reality no matter where you go.