Should you use a solar loan to finance your solar power system?

Written By The IPS Team

On May 22, 2015

At a Glance:

Solar loans are new and powerful financial mechanisms to help homeowners with the often high upfront costs of owning a solar power system. In many cases, zero money down options exist to help with the down payment on a solar installation.

Unless you have a large amount of cash, purchasing a solar power system outright may not be your best option. Even if you have the cash to purchase a system outright, you may want to invest it into some other asset (or that motorcycle you’ve always dreamed of). Whatever your reasons are, you could always consider a solar loan; it’s not as scary or complicated as you may think. For example, one loan that we offer is a “Same as Cash” loan. This basically means you put zero money down for a down payment at the time of the installation.

Then, once you get your 30% Federal solar tax credit, you pay that amount to the lender. You can wait up to 12 months after the installation to pay your 30% down payment. The great thing about this loan is that you have no payments for up to 12 months, and in essence, free electricity for all those months. After you pay off the loan, you have free electricity for the life of the solar power system. Besides the financial benefits, you are also decreasing your carbon footprint, and showing your kids that you care about their future.

The loan above may not be the truly “zero down” solar loan you’re looking for. There are definitely zero-down loans available, even one that we offer, but they will have larger monthly payments for the same loan term. The upside is that you keep the 30% Federal tax credit as well as any other applicable state incentives. You can use that tax credit to take your family on a vacation or to invest in something else. With loan terms ranging from 5 to 20 years, you essentially get to choose your monthly payments. A 20 year zero down solar loan is almost identical to a 20-year solar lease. The major difference is that after those 20 years of payments you keep your solar power system, whereas with a lease you’d have to renew your lease.

One thing that people generally worry about when getting into a solar loan is selling their home before the loan is up. Depending on whether your solar loan is secured or unsecured, you may have different options for what to do when selling your home. If the loan is unsecured, it’s tied to you as the borrower. So once you sell your home you can pay off the loan or keep making monthly payments until the solar loan term is up. If the loan is secured, it’s tied to your home, using it as collateral. With a secured solar loan, you will have to pay off the loan before selling your home.

The Lawrence Berkeley National Laboratory found that solar homes sold for an average of $5,500/kW more than comparable non-solar homes. That means if you got a typical 5kW system installed, you may be able to get an extra $27500 when you sell your home. So chances are that you will get more in the increased selling price than you paid for the system.

Find out more about financing your solar system by filling out a solar assessment form. We will have a design consultant come out and discuss your options with you.

ground-mounted solar system
Reed Crossley

About Independent Power Systems

Independent Power Systems (IPS) has been designing and installing premium solar and energy storage systems for residential and commercial customers in Colorado, Massachusetts, and Montana since 1996. Our team of highly skilled engineers, electricians, and installers is committed to innovation in energy resilience and sustainability as well as helping the community achieve energy independence, do right by the environment, and save money in the process. To date, IPS has installed thousands of grid-tied, off-grid, remote wind, and microgrid systems including several challenging international projects for large commercial clients and the military.

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