A man and a woman discussing their solar financing options with an expert

Solar Financing Options - The Best Solar Financing Companies

Aniket

Written by qualified solar engineer Aniket on January 7, 2020

The costs of solar systems have decreased at an incredible rate in the past few years. Despite that, it does come with a significant price tag and some people may deem it to be expensive to buy outright. However, there are a few options where the customer can enjoy the benefits of solar without having to pay for it at once.

This article will cover the available solar energy financing options and the best solar finance companies for getting solar panels. This includes the oldest financing method of a loan, and novel methods such as PPA, along with the leasing option. All of these have their own pros and cons and may apply to different sets of people. Let us see these in more detail so you can make an informed decision.

Available Financing Options for Solar

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The following are the solar system financing options in the market that are currently available:

Loan

One of the most traditional solar panel financing methods you can choose for your solar system purchase is a loan. You can either opt for a solar loan, or a personal loan. A solar loan will be considered as a ‘home improvement loan’ and will have your property as the mortgage. The solar financing rates of interest, down payments, terms, etc. In this case will be like any other home improvement loan.

You will, however, need to provide your credit history and the sanctioning of this loan will be subject to your credit score.

In the case that your credit score is not considered sufficient to be eligible for a loan, you can try financing through the special program of PACE (Property Assessed Clean Energy). As the name suggests, the eligibility criteria for this loan is not your credit history, but your property tax assessment, which is currently the best low credit score solar financing option.

Some states or financial institutions can also offer solar loans at a subsidized rate. This is done in order to promote clean technologies. Loans are increasingly been sought for solar farm financing of all sizes.

The greatest benefit of choosing a bank loan as your financing option is that you become the legal owner of the solar system. Owing to this, you are eligible for the federal tax credit for solar (ITC) which is 30% of your solar system’s purchase cost. This is often the argument that makes the down payment worth paying for.

Power Purchase Agreement

Commonly known as PPA, this is a method in which the customer only pays for the power he purchases, as is evident from the name. The agreement will have a duration decided by the offering company and can be 10 or 15 years. All the costs of the system are borne by the installing company, including the cost to install as well as maintain.

The biggest benefit of this system is there is zero one-time investment for the customer as he is not purchasing the solar system. At the same time, the monthly payments also do not affect the cash-flow adversely as the solar system reduces energy purchased from the grid. Since solar systems last for more than 25 years, entering a Power Purchase Agreement is beneficial in the short as well as long-term.

PPA is widely considered as a system that creates a win-win situation for both the customer and the company. Commercial solar financing companies often propose the PPA model, given the large sizes and costs of commercial solar systems.

The only disadvantage of this financing method is that the customer is not the owner of the system until the agreement is in action. Owing to this, the federal tax credit is not available to such customers.

Lease

Another common method of financing your solar system is leasing it. When you lease the system, essentially you pay over intervals for using the system, similar to a rental system. A significant number of residential solar financing companies offer leasing as an option.

Here, too, since the customer is not the owner of the system, the responsibility of maintenance goes to the installation company who provides the system on lease. The leasing amount is decided by the company based on the size of system and the approximate amount of energy that will be generated every month.

The customer cannot avail the solar tax credit if he chooses the leasing option, since he isn’t the system’s owner… the same reason as in a PPA.

Choosing the Right Option

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Every financing option for solar has its own set of advantages and limitations, and there is a large variety of solar finance companies to choose from. This may make you wonder what the best way is to finance your system. There is no golden rule of which option is the best, but depends on factors on the customer’s end. If you are eager to receive the 30% tax credit and are willing to pay a down-payment, then a loan might be perfect for you. You can even try working out a few numbers beforehand using a solar financing calculator.

For someone who wants to start in a zero down payment way, the lease or PPA system makes more sense. In the end, you should assess your factors and what numbers the solar panel installation companies are proposing in lease/PPA, and you might have the perfect answer figured out. In either case, opting for solar energy will certainly bring you savings while also increasing the sale value of your home.

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