1. There are different types of loans
Looking into how to finance solar panels for your home? You’ve come to the right place. Solar financing is on the rise as more and more homeowners like you want to free themselves from their energy bills and reduce their carbon footprints. If you aren’t looking to dip into your savings or don’t have the cash on hand to pay for an entire solar energy system for your home, a popular option is to apply for a solar loan. But before you do, here are the 5 things every homeowner should know about solar panel loans.
There are many solar financing options to choose from, especially when it comes to solar panel loans. But we’re going to break it down to two: secured and unsecured.
Secured Solar Loans
Secured solar loans are backed by collateral, like your home. This means if you default on the loan, the lender may have the right to repossess that collateral. The most popular examples include home equity loans and home equity lines of credit (HELOC), which are secured by a second mortgage on the residence itself. Another type of secured solar panel loan is called a Property Assessed Clean Energy, or R-PACE loan. These loans are taken out by homeowners who have lower credit scores, so generally, a residential, or R-PACE loan has a higher interest rate.
Unsecured Solar Loans
Unsecured loans are not backed by collateral, so your property is not at risk. Instead, unsecured solar panel loans are backed by your creditworthiness. If you have a good credit history and can show you’ve paid off your prior debts on time, then an unsecured loan option may be right for you. The higher your credit score, usually the better the rate you get on your solar panel loan.
2. Solar panel loan duration
As you research the right solar financing options for your needs, it is important to know how long you’ll have to pay off a solar panel loan. Solar panel loans can range anywhere from 3-30 years, although 10-20 years is most common. Make sure you choose the duration that gives you a monthly payment amount you know you can stay on top of and afford.
3. Down payment requirements
Make sure to ask about any down payment requirements for your solar panel loan. Many companies, provide access to a network of top installers who offer zero-down solar loans, meaning there is no down payment needed. When down payments are necessary for solar financing, usually the maximum is $3,000.
4. Solar panel tax credit eligibility
According to the U.S. Department of Energy, the federal investment tax credit works like this: Depending on your tax liability, you may be eligible for a 26% credit for solar systems installed in 2020 and 22% for systems installed in 2021. The credit expires permanently in 2022.
There also may be other credits and incentives available, but you must follow certain criteria to be eligible. You can read more about state credits.
5. Your return on investment
Most homeowners just want to know one thing: is a solar panel loan worth it? Let’s take a look at why solar financing may be a good opportunity for you financially.
First, according to the U.S. Solar Energy Technologies Office, the monthly payments you’d make on a solar loan are smaller than a traditional energy bill.
Other benefits may include:
. Increase property values.
. Reduced reliance on the power grid
. A smaller carbon footprint
Ready to take the next step in solar financing?
If you’re ready to take the next step in solar financing and would like to learn more about applying for a solar panel loan, LAZEN Solar can help you get started.