Solar loans: Everything you need to know (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. With this in mind, some homeowners choose a longer loan term to keep their monthly expenses low and pay off the loan when they have the money available. Before taking this approach, it's important to check whether your lender charges a prepayment penalty.

When you take out a loan, you're eligible to receive the federal solar tax credit after you install your solar panel system, which allows you to claim 30% of your system's total cost on your taxes. If you use your solar tax credit to pay off some of your loan's principal, you'll have even less to pay in the long run. Some solar loans, known as re-amortizing loans, are structured to consider this and adjust your payment amounts based on when you are receiving your benefit from the tax credit. Even if you don't specifically take out a re-amortizing loan, you can still use your savings from the tax credit to pay off a large portion of your loan's principal.

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 all the fees mentioned above—not just the interest rate—to ensure you get the best deal and the loan that works best for you. 

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. 

It’s important to consider the total cost of financing your solar panels rather than relying on the interest rate alone to evaluate your loan options. 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, mainly because solar loans aren't usually held for the entire loan term.

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 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.

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 approximately 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 lease or power purchase agreement (PPA), but we tend not to recommend going this route because you won't own your solar panels.

Solar loans have become increasingly accessible in recent years, and the number of banks and financial institutions offering them continues to grow. 

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: Solar is growing in popularity, and big banks are jumping on board. Some now offer specialty loan products tailored to 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: