Best Solar Panel Loans of 2022 – Forbes Advisor

Solar panel loans are just one type of solar financing. You can also rent solar panels, enter into a power purchase agreement, or choose from other common forms of financing.

State and Federal Solar Incentives

Although not a form of financing, the Federal Solar Incentives allow homeowners to deduct 26% of the cost of a solar panel system from their federal taxes for systems built between 2020 and 2022 and 22 % for those purchased in 2023. Program will expire in 2024 unless renewed by Congress.

State solar incentives vary, but many states offer their own tax credits or rebates between 10% and 20% of panel costs. Depending on your location and utility provider, additional special financing programs may be available.

Home Equity Loan

With a home loan, you can borrow against the equity in your home and use the proceeds to purchase solar panels. Since a home equity loan is secured by the home, this type of financing usually comes with a lower interest rate than a solar panel loan, but it also carries the risk of foreclosure if of default of payment. Home equity lenders generally only allow homeowners to borrow up to 85% of the equity in their home.

Home Equity Line of Credit (HELOC)

A HELOC is similar to a home equity loan, but instead of getting a cash lump sum, you get a line of credit that you can access as needed. HELOCs generally have variable interest rates, so they are less predictable than personal loans and home equity loans.

Refinancing by collection

If you have equity in your home, you can refinance your mortgage and get cash to cover the cost of buying and installing solar panels. Lenders typically require homeowners to keep at least 20% of their home’s equity when getting a cash refinance.

Mortgage interest rates are lower than unsecured alternatives, but a withdrawal refi will increase the size of your mortgage and the amount of interest you pay over time. You will also have to pay closing costs, which can range from 2% to 6% of the mortgage amount.

Lease or PPA

With a solar lease, the landlord makes monthly payments to the solar panel installer but does not own the solar panels. A PPA, on the other hand, involves a homeowner installing solar panels at the expense of the utility company and then purchasing electricity at a lower rate than the usual cost of electricity. In both structures, maintenance is usually handled by the owner of the solar panel, not the owner.

These arrangements can be a good option if you want to switch to solar power but don’t have the money to pay for the panels upfront or make large loan payments. Renting can also be an optimal choice for those who do not want to take care of panel maintenance themselves. Still, solar panel loans are the best option if you want to own your solar panels and enjoy the maximum financial benefits.

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