Solar loans: Everything you need to know in 2025

If you’re interested in going solar but feel like you can’t afford the upfront costs, think again. The availability of solar loans—some of which require no down payment—has greatly increased over the past few years, making installing solar panels more accessible for the average homeowner than ever before. 

Depending on how expensive your monthly electric bill is, you can save over $100,000 on your utility bills over the lifetime of your solar panels. Taking out a solar loan is one of the most common ways to finance a solar energy system, but you can also finance your solar energy system with other types of loans, such as a home equity loan or HELOC. 

We'll walk through all of your choices and explain why they do or don’t make sense for your particular financial situation when it comes to paying for solar panels.

Disclaimer: This article is intended to provide an informational overview of solar loans for interested homeowners. It's not intended to serve as official financial guidance. Readers interested in installing solar products should use their best judgment and seek advice from a professional before making any purchase or investment decision.

Solar loans are similar to home improvement loans for projects like remodeling your kitchen, upgrading an HVAC system, or adding a new bathroom. Like these other types of loans, when you borrow money from a lender to finance a solar panel system, you agree to pay it back with interest in monthly installments over a fixed loan term.

Solar loans have the same basic features as other types of loans. As you compare your solar loan options, you'll want to consider all the features of the loan, including:

The true cost of your loan will depend on your interest rate, fees, loan term, and the cost of your solar panels. If you choose a longer loan term, you'll pay more interest, but your monthly payments will be less than if you take out a shorter loan. You'll save more over the long term if you can afford higher monthly payments.

Long- or short-term loan: Which should you choose?

It's not uncommon for people to pay off their loans before the term ends. According to Ravi Mikkelsen, CEO of Atmos Financial, a national solar loan provider offering seven to 20-year solar loans, over 90% of his customers pay off their loans in under six years.

"Sometimes, if they get a very short duration loan because they want to pay it off quickly, then it can be higher than the monthly bill, but then their return on their investment is higher as well," said Mikkelsen.

Some homeowners opt for a longer loan term to keep their monthly expenses low and pay off the loan when they have the funds available. But before taking this approach, it's important to check whether your lender charges a prepayment penalty.

The loan with the lowest interest rate may not be the best deal

Different lenders offer different interest rates. If you've shopped for a mortgage or a car before, your eyes may be trained to seek out the option with the lowest interest rate. However, when shopping for solar loans, it's especially important to consider the total cost of financing your solar panels rather than relying on the interest rate alone to evaluate your loan options.

Solar lenders often use origination or dealer fees to subsidize artificially low interest rates for their loan products. In other words, they can charge you a lower interest rate because they charge you higher fees upfront. Those higher fees often cancel out any benefit the low interest rate was providing, which is why you need to factor in all of the fees in addition to your interest rate when figuring out what type of loan will save you the most money.

Dealer fees can be as high as 30%—sometimes even higher—and are often hidden in the financed loan price (be sure to inspect your quotes and ask installers what the differences between the cash price and the financed price are). So, even if your interest rate is low, you'll be paying 30% more for your solar panel system, negating any benefit you may expect from selecting a loan with a lower interest rate.

A loan with no dealer fee may have a higher interest rate, but in most cases, you'll pay less for your panels overall if you select this option—especially if you plan to pay off that loan early.

What types of solar loans are there?

Solar loans come in different packages, like any other financial option, with varying structures, terms, and conditions. Let's explore what to consider when finding the right solar energy loan.

Secured vs. unsecured loans

You can categorize most loans into two general buckets: secured and unsecured. Secured loans tend to have lower interest rates, but require an asset that will serve as collateral for the loan. In most cases, that asset will be your home, which means your lender can foreclose on your home to pay themselves back if you default on your loan for any reason. On the other hand, unsecured loans don't require any collateral other than the solar equipment itself, but tend to have higher interest rates.

Amortized vs. re-amortized solar loans

Your solar loan will either be amortized or re-amortized.  

• Most secured loans are amortized, meaning you have a set monthly payment and terms. 

• Most unsecured solar loans are re-amortized, which means you pay a lump sum after a certain amount of time (usually about one year), and then your payments reduce after that lump sum payment.

Other types of loans may offer better terms and rates than solar-specific loans, so it's worth looking into all your options. For example, you can tap into your existing home equity by taking out a home equity loan or a home equity line of credit. You can also consider signing a solar lease or power purchase agreement (PPA).

If you're already getting a quote from a solar installer, they'll likely come to the table with a few different financing options. On the EnergySage Marketplace, you'll see your solar loan options when you receive solar installation quotes. Those loan options, and others you find directly, can come from a few different sources:

• Credit unions: Local banks and credit unions all over the country offer standard personal loans and energy loan products for homeowners. 

• National lending institutions: Some major banks offer specialty loan products specifically designed for residential solar panel systems.

• Public-private partnerships: Local government agencies sometimes partner with private lenders to offer low interest rates and no fees for solar loans.

• Utilities: Some utility companies offer competitive on-bill financing programs that allow you to finance solar energy systems and repay the borrowed amount as part of your monthly electric bills.

• Municipalities: Though not available in every state, some municipalities offer Property Assessed Clean Energy (PACE) solar energy financing. When you finance a system with a PACE loan, you repay it via an annual assessment on your property tax bill.

• Specialized solar lenders: Many companies today specialize in solar loan products. They partner with banks and a network of solar installers to offer loans.

Choosing the right solar loan can help you quickly maximize your solar savings. You want to ensure you understand what fees you're responsible for, when to pay them, and how they impact your overall payment structure and payback period. Ask your lender if there are any hidden fees in the fine print.

With this in mind, we created a checklist you can use to ask your installer or lender about your solar loan: