Solar financing & loans term glossary

As with other types of financing, there's often a lot of jargon documentation to decipher when evaluating and getting a solar loan. We break down some of the standard terms you'll see when comparing solar financing and loan options for you here.

Disclaimer: This article is intended to provide an informational overview of solar loan fees for interested homeowners. It is not intended to serve as official financial guidance. Readers interested in installing solar products should use their best judgment and seek advice from a licensed professional before purchasing or investing.

Annual percentage rate (APR)

The annual cost of getting credit is expressed as a percentage. Depending on your lender and the type of loan, you may see percentages for both an APR and interest rate in your loan documentation. If this is the case, the APR will usually be higher than the interest rate since it includes other loan fees.

Credit pull

A credit pull is another way to say credit inquiry. There are two types of credit inquiries — hard inquiries and soft inquiries.

Credit report

Your credit report showcases information about your current and past credit accounts, including any credit cards, loans, mortgages, and inquiries. Most items stay on your credit report for seven years, though the duration can be longer or shorter depending on the item. Much of the information on your credit report determines your credit score. Lenders usually review your credit report before approving you for a loan.

Credit score

See FICO Credit Score below

Dealer fee

Also known as a loan or lender fee, solar lenders sometimes charge a premium to cover the risk of lending money for a loan. Additionally, fees could be assessed as closing costs depending on the lender and type of loan. Learn more about solar loan fees here.

Down payment

The amount of money you're required to put down to obtain a solar loan. Often, solar loans are available with no money down or zero down, though you'll need to confirm specifics for your loan. If you receive a solar loan quote through EnergySage, the down payment amount is shown in your quote view.

FICO Credit Score

The credit scoring model is most used by lenders. Your credit score falls on a scale between approximately 300 and 850, with a higher score indicating a lower risk to lenders. For example, a FICO Score of 800 or above is considered exceptional, and a score ranging from 740 to 799 is very good. A higher score means you'll usually qualify for more competitive loan terms and lower interest rates.

Your credit score will vary depending on the scoring model, so the numeric value of your FICO Score may be different than your VantageScore (another scoring model often used). However, the ranges of credit scores are usually pretty comparable, so an excellent score in one score is usually excellent in another.

Financing term

The length of your loan or how long you'll be making payments. This is usually expressed in months. Your financing term may impact your interest rate or other loan fees. It may also be known or labeled as loan term, loan length, or loan contract. If you get solar quotes on EnergySage, the financing term is available in your quote view.

Gross system price

This is your solar system's total cost, including all interest, fees, equipment, and installation costs, before any incentives, rebates, or credits. If you receive a solar loan quote through EnergySage, the gross system price is available in your quote view.

Hard inquiry

A hard inquiry, also known as a hard credit pull, happens when you complete an application with a lender for a solar loan and that potential lender requests to see your credit report and/or score. A hard inquiry will slightly impact your credit score for two years (the length of time it stays on your credit report). Though unless you apply for a lot of credit over a short period, you usually won't see a hugely negative impact on your score. You can see any hard inquiries when you view your credit report.

Home Equity Line of Credit (HELOC)

A line of credit secured by the equity in your home, which can be used for home improvements, debt consolidation, and other major purchases. Some homeowners leverage a HELOC to pay for solar panel installation. Interest paid in a HELOC is usually tax-deductible, but you'll need to consult a tax professional to confirm based on your individual circumstances.

Home equity loan

Also known as a second mortgage, this allows you to borrow against the equity you've accrued in your home. Some homeowners use a home equity loan to pay for solar. The amount available to you in a home equity loan depends on various factors, such as the equity you've built up, your income, and your credit score. When you finance your solar panel system using a home equity loan, you will typically repay the lender through monthly payments at a fixed interest rate. The interest paid is typically tax-deductible, but you should consult a tax professional to confirm based on your situation. Learn more about home equity loans here.

Interest rate

The amount you pay to borrow from a lender in exchange for getting money to finance your solar panel system is expressed as a percentage. Interest is usually paid over the length of the loan. The interest rate is available in your EnergySage quote view if you've requested financing options.

Investment tax credit (ITC)

Also known as the federal solar tax credit, this is the tax credit available to anyone installing a residential or commercial solar system in the U.S. As of 2023, it is 30%, which means you get a credit for 20% of the cost of installing a solar energy system from your federal taxes. There is no cap on its value. Learn more about the ITC here.

Loan amount

The total cost over the lifetime of your solar loan, inclusive of the base amount (cost of solar panel installation), interest, and any fees. The loan amount is available in your EnergySage quote to view if you've requested financing options.

Loan term

See financing term. May also be known or labeled as loan length or loan contract.

Monthly payment

This is the payment you'll make each month for your solar loan. Depending on the type of loan, your monthly payment may be variable. The monthly payment is available in your EnergySage quote to view if you've requested financing options.

Net system price

This is the cost of your solar system after any incentives, rebates, or credits. This gives you a better idea of your actual costs to determine your solar payback period or return on investment. The net system price is available in your EnergySage quote to view if you receive a solar loan quote.

Payback period

This is when it takes to pay back your solar purchase or fully realize your return on investment (ROI). The length of your solar payback period varies due to factors including your total cost, energy usage, available incentives, and local cost of electricity. Learn how to calculate your solar payback period here.

Pre-approval

Solar loan pre-approval is a way for a potential lender to gauge your creditworthiness and identify the terms and interest rates they may offer you for your solar loan. They usually use a soft inquiry or soft credit pull to get an initial view of your credit report. However, a pre-approval isn't necessarily a guarantee, as your interest rate or terms may change if you've recently taken on additional debt or had a reduction in income.

Secured solar loan

With a secured solar loan, the lender requires you to provide an asset as "security" if you default on it. Usually, this means leveraging your home as collateral. Some examples of secured loans include HELOCs and home equity loans. Usually, you can get lower interest rates with secured loans, though the approval process takes a bit longer. Learn more about secured solar loans here.

Soft inquiry

A soft inquiry–also known as a soft credit pull–happens when a potential lender checks your credit report to pre-approve you for a solar loan. A soft inquiry doesn't impact your credit score; you can see any soft inquiries when you view your credit report.

Solar loan

A lending product specifically created to cover solar panel installation. Other lending options for financing solar could include HELOCs, home equity loans, personal loans, or a green bank loan.

Third-party ownership (TPO)

TPO is when someone other than the property owner or homeowner owns the solar system, including leases and power-purchase agreements. According to the National Renewable Energy Laboratory (NREL), TPOs represented 62% to 72% of U.S. solar systems between 2012 and 2014. However, over the last few years, TPO market share has decreased substantially as solar loans have become more accessible.

Unsecured solar loan

This loan type doesn't require putting down your home or other collateral, so it can usually get approved more quickly. You will also likely get zero-down payment options with an unsecured solar loan. However, you may have higher fees to make up for the fact that there's no security for the lender as there is with a secured loan. Learn more about fast solar loans here.