How to Finance Your Own Solar Panel System

How to Finance Your Own Solar Panel System

How to Finance Your Own Solar Panel System


Installing solar panels on your home can be a great way to save money on electricity costs and help the environment. However, the upfront cost of purchasing and installing a solar panel system can be daunting. Fortunately, there are several financing options available that can help make going solar more affordable. In this article, I will provide an in-depth look at the various ways you can finance your own solar panel system.

Assessing Your Solar Needs

Before exploring financing options, the first step is to assess your solar needs. This involves determining how many solar panels you need and the estimated cost. To do this:

  • Consult with solar installers to get quotes for a system that can offset 80-100% of your electricity usage. Be sure to get multiple quotes.
  • Determine the size system (watts) needed based on your electricity bills and home energy use.
  • Calculate the estimated cost including solar panels, inverters, racking, wiring, permits, and installation. Costs typically range from $10,000 – $30,000.

Once you have quotes in hand, you’ll know how much funding you need for the solar panel system.

Financing Options

There are several ways to finance a solar panel system for your home:

Cash Purchase

  • The most straightforward option is to pay cash upfront. This avoids financing costs but requires having significant savings.
  • To save for a solar system, open a separate savings account and automatically deposit funds each month. It may take 2-4 years to save enough this way.
  • Paying cash upfront means owning the solar system outright.

Home Equity Loan or Line of Credit

  • A home equity loan or line of credit uses your home’s equity as collateral.
  • Interest rates are usually lower than other financing options.
  • You can borrow a lump sum or access funds as needed. The funds do not need to be used for home improvements.
  • Payments are made monthly over a fixed term, typically 10-20 years.

Solar Loan

  • A solar loan is a loan from a bank or credit union specifically to purchase a solar system.
  • Loan terms are typically 10-20 years with interest rates of 3-8%.
  • Monthly payments are fixed over the loan term. No home equity is required.
  • Down payment requirements vary, often 10-20% of system cost.

Solar Lease

  • A solar lease allows you to rent a solar system for monthly payments over a term of 15-25 years.
  • Typically little to no money down is required.
  • The solar company owns and maintains the system. You buy the electricity generated.
  • Payments are fixed over the term. When the term ends, you can extend, buy the system, or have it removed.

Solar Power Purchase Agreement (PPA)

  • A PPA is similar to a lease but you pay for the power generated each month based on a rate per kWh.
  • The rate starts low but may increase by a fixed percentage each year.
  • Like a lease, no system ownership but you get solar power at a lower cost than utility rates.

Property Assessed Clean Energy (PACE) Financing

  • PACE financing allows homeowners to borrow funds for energy improvements that are paid back through a special assessment added to the property tax bill.
  • Payments are made over 5-30 years. If the property is sold, the assessment stays with the property to the new owner.
  • PACE is available in certain municipalities and states. Eligibility requirements apply.

State/Local Incentives and Rebates

  • Check for state, utility, and local incentives or rebates for solar in your area. These can reduce your overall cost.
  • For example, local utilities may offer a rebate per solar panel installed. Some states offer tax credits.
  • Do thorough research, as solar incentives can make a significant impact on cost.

Weighing the Financing Options

With many financing options available, it’s important to weigh the pros and cons of each for your situation:

  • Cash or home equity provide the greatest long term savings, but require having funds available upfront.
  • Loans offer low fixed rates but require creditworthiness. Leases/PPAs require little upfront cost but higher long term payments.
  • Calculate the total cost over the life of the financing term, factoring in tax credits and incentives.
  • Assess your budget and how much you can pay upfront vs. over time in loan payments.
  • Understand the requirements of each option and compare that to your financial situation.
  • An installer or solar advisor can help assess the options to find the optimal solution for you.

The Importance of Quality Installers

While financing is key, it’s also important to choose qualified, high-quality solar installers to ensure proper system design and installation. Be sure to:

  • Get proposals from at least 3 top-rated local installers.
  • Verify they have all licenses and insurance required in your state.
  • Ask about their design and installation processes.
  • Request references from past clients and call them.
  • Review the warranties they provide on system components and labor.

Taking time to find experienced installers will pay off in a smoothly installed, high-performing solar system.

Final Steps Before Going Solar

Once you’ve explored financing options and quality installers, there are a few final steps to take:

  • Review proposals and financing terms in detail before signing a contract.
  • Get required permits and approval from your local utility before installation.
  • Understand the net metering policy and how excess solar energy is credited.
  • Calculate federal, state, and local tax incentives you can take advantage of. The installer should provide documentation needed here.
  • If financing, submit loan/lease applications well in advance of installation.
  • Plan for several weeks from contract signing to full system operation.


Installing solar panels is a major investment that can pay off for decades through lower electricity costs and energy independence. Properly financing your system is key to making it an affordable option. With the right financing coupled with quality equipment and installation, you’ll be well on your way to reaping the benefits of solar energy for your home.