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Financing options make solar energy systems accessible and affordable for people who can’t or don’t want to pay cash.
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Homeowners have several options for solar panel financing.
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While interest on solar loans adds cost, a financed system can still save homeowners money in the long run.
Solar energy equipment is no small purchase. With an average price of $17,823 for a 5 kW system based on internal data collected by PowerOutage.us, paying cash for a new system isn’t an attractive option—or an option at all—for many homeowners. Solar panel financing provides a way to make the switch to renewable energy through affordable monthly payments.
Solar costs and financial returns vary depending on factors like electricity prices, system performance, financing terms, and incentives. According to the U.S. Department of Energy and the National Renewable Energy Laboratory (NREL), residential solar systems typically operate for 25 years or more, which is why most financial comparisons evaluate savings over a multi-decade period.
We created this guide to solar panel financing to help you understand how it works and what options are available to you. You’ll also find information about how financing affects solar panel cost, so you can make an informed decision about your investment.
PowerOutage.us tracks outages across 950+ utilities serving more than 200 million customers. This nationwide coverage helps homeowners judge whether solar+battery financing aligns with real outage exposure and energy reliability concerns in their area.
How solar panel financing works
Financing for solar panels works in mostly the same way as financing for other large purchases. Borrowers apply for a loan to pay for the cost of a home solar system from financial institutions or private lenders and pay that loan back over time.
Instead of paying the full cost upfront, homeowners make monthly payments that combine principal and interest. The financial goal is typically to keep loan payments close to or lower than the homeowner’s previous electricity bill.
For example:
Estimated monthly solar savings = monthly electric bill - expected remaining utility charges
Estimated monthly loan payment = monthly payment required for the solar loan based on loan amount, APR, and loan term
If monthly savings are close to or greater than the loan payment, the homeowner may reach a positive financial return sooner.
Where to get solar panel financing
If you’re looking to get financing for your solar panel system, there are several categories of lenders that may be available to you, including:
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Commercial banks: Traditional banks offer several types of loans that can be used to pay for solar panels, like home equity loans and personal loans. Some national and regional banks now offer energy-efficiency loan programs as part of broader green lending initiatives.
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Credit unions: You can find most of the same loan products at a credit union as you would at a commercial bank, but you may have fewer options. Some credit unions participate in local clean-energy financing programs or state energy-efficiency lending initiatives.
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Mortgage lenders: Lenders that specialize in mortgage loans tend to offer home equity loans and cash-out refinance loans you can use for solar. These loans may offer longer repayment terms than personal loans.
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Solar energy-specific lenders: With the increasing popularity of solar energy, there are now some lenders that specialize in loans for solar panels and other home electrification projects. These lenders sometimes coordinate with installers during the purchase process.
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Solar contractor financing: Some solar energy contractors offer their own financing programs, usually through a lending partner. In this scenario, the installer connects the homeowner with a loan provider during the installation process, which can simplify paperwork but may limit comparison shopping.
What to expect from a solar loan program
Like other loans, approval for solar panel financing is dependent on lenders’ requirements and how your financial profile measures up to those requirements. While the specific requirements vary from one lender to the next, lenders will typically consider the following criteria:
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Credit score: Your credit score is perhaps the single biggest factor in your loan eligibility. Borrowers with “good” or “excellent” credit scores will have the least trouble being approved and get access to the lowest interest rates.
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Debt-to-income (DTI) ratio: Lenders need to know that you have the money to reliably make your payments. They determine this by comparing your monthly income to your monthly debt obligations, like mortgage, credit card, and auto loan payments. To be approved, you will need to show that you have enough room in your budget after paying other debts.
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Credit utilization: How much of your available credit you’re using is also a factor in your loan eligibility. Many lenders are reluctant to loan money to borrowers who have “maxed out” or come close to maxing out their available credit.
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Home equity: If you’re looking to get a home equity loan or apply for a home equity line of credit (HELOC) to finance your solar panels, the amount of equity—or, the difference between what you’ve paid on your mortgage compared to your home’s market value—is an important factor in your loan eligibility.
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Credit history: This includes a record of missed or late payments, closed accounts, and lines of credit you’ve applied for recently.
Types of solar loans: secured, unsecured, and home equity
Loans for solar panel financing fall into three broad categories: secured loans, unsecured loans, and home equity loans. In the following sections, we go over how these loans work and how they differ from one another.
Secured loans for solar panel financing
Secured loans are loans that require collateral—assets of value you own—to provide a source of recourse to the lender if you default on your payments. This could be something like your home, an automobile, or even cash stored in an account.
Some solar lenders structure secured loans around the solar equipment itself, while others use home equity or other property as collateral.
Pros and cons of secured solar panel loans
Here’s a look at some of the main pros and cons of using a secured loan to finance your solar panel installation:
| Secured Solar Loan Pros | Secured Solar Loan Cons |
|---|
| ✅ Often have lower interest rates than other types of solar loans | 🚫 Property used as collateral may be repossessed if you miss payments |
| ✅ May have lower credit eligibility requirements | 🚫 Application process may take longer than unsecured loans |
| ✅ Longer repayment terms may reduce monthly payments | 🚫 Some loans may include origination or closing fees |
Unsecured loans for solar panel financing
Unsecured loans are loans that do not require a form of collateral for approval. Instead, lenders base their decision on your credit rating and overall financial profile. The most popular types of unsecured loans are personal loans and credit cards.
These loans are commonly used for smaller residential solar systems or partial system upgrades like adding a battery to an existing solar array.
Pros and cons of unsecured solar panel loans
In the table below, we’ve listed some of the key upsides and downsides of using an unsecured loan to finance your solar energy system.
| Unsecured Solar Loan Pros | Unsecured Solar Loan Cons |
|---|
| ✅ No risk of repossession of property used as collateral | 🚫 Tend to have stricter eligibility requirements |
| ✅ Typically approved faster and funds dispersed more quickly | 🚫 Higher interest rates than secured loans |
| ✅ Funds can often be used for any purpose without lender restrictions | 🚫 Loan terms are usually shorter, increasing monthly payments |
Home equity loans for solar panel financing
Another popular way to finance your solar energy system is by using a home equity loan. With this option, you borrow money against the equity you’ve built up in your home.
There are two main types of home equity loans to consider:
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Home Equity Loan: This is a second mortgage that lets you take out a lump sum of cash when you refinance. You can typically borrow up to the difference between what you owe on your home and the new amount you finance. Home equity loans often come with either a fixed or variable interest rate.
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Home Equity Line of Credit (HELOC): A HELOC works more like a credit card, giving you a revolving line of credit based on your home’s equity. During the draw period, you can use funds as you need them, up to your credit limit. After this period ends, you enter the repayment phase, where you pay back the balance you’ve borrowed.
Both options allow you to tap into your home’s value to help pay for your solar installation, but it’s important to understand how each works before deciding which is right for you.
Pros and cons of home equity solar loans
You can find some of the key advantages and disadvantages of home equity loans for solar panels in the table below.
| Home Equity Solar Loan Pros | Home Equity Solar Loan Cons |
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| ✅ Typically come with lower interest rates than personal loans | 🚫 Risks repossession of your home if you default |
| ✅ Longer loan terms can reduce monthly payments | 🚫 Loan amount limited by the equity in your home |
| ✅ May offer tax advantages depending on how funds are used | 🚫 May come with origination fees and closing costs |
How solar loan interest rates impact ROI
When you take out a loan to finance your solar panels, you’re increasing the total cost of your solar system. Interest payments can add hundreds or even thousands of dollars over the life of the loan.
That’s why your interest rate—also called the annual percentage rate (APR)—has a big impact on the return on investment (ROI) for your solar panels.
Paying interest means it will take longer to break even on your system, which also reduces your overall energy savings. However, if electricity prices increase over time, energy savings may increase as well, which can shorten the effective payback period.
Solar panel financing APR cost comparison
Interest for solar panel financing loans may cost more than you think, so it is critical to include them in your budget plans. The table below shows the total cost of a loan and the amount of interest you’d pay for $18,000 in solar panel financing over a 15-year period.
| Amount Financed | Solar Loan APR | Monthly Payment | Total Cost of Loan | Total Cost of Interest |
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| $18,000 | 5% | $142 | $25,622 | $7,622 |
| $18,000 | 6% | $152 | $27,341 | $9,341 |
| $18,000 | 7% | $162 | $29,122 | $11,122 |
| $18,000 | 8% | $172 | $30,963 | $12,963 |
| $18,000 | 9% | $183 | $32,862 | $14,862 |
Is financing solar panels worth it?
Even after you factor in extra costs like interest and loan fees, financing solar panels can still make financial sense for many homeowners.
Savings depend on factors like local electricity prices, sunlight conditions, incentives, and system performance. In many areas of the United States, long-term electricity costs are expected to rise over time, which can increase the value of the energy produced by a solar system.
Solar panel installation can also boost your home's value and reduce your carbon footprint, making it a worthwhile investment in the long run.
However, the information in this article should emphasize the importance of shopping around for the best interest rates available to you for a solar panel loan.
As you can see in the table above, a loan with a 6% APR ends up costing more than $1,700 more than one with a 5% APR over the life of the loan. The difference between a 5% APR loan and a 9% APR loan is more than $7,200.
How solar loans compare to other financing strategies
You have several ways to pay for your solar panels. In this section, our experts have ranked these payment options from best to worst so you can easily compare and decide what works for you.
1. Buying solar panels with cash
If you have the spare funds to purchase your solar energy equipment outright, this is your best option for a few reasons.
The first is simple math—solar equipment is cheaper when you don’t have to pay interest on financing. But it’s also a simpler and faster process since you don’t have to apply for a loan and do all the paperwork that goes with it.
2. Financing solar panels
If you can’t pay for a solar panel system upfront, your best option is to finance your purchase.
Homeowners who finance can still claim available tax incentives if they own the system.
The federal Residential Clean Energy Credit (RCEC) allows taxpayers to claim a credit equal to 30% of the cost of qualifying renewable energy equipment, including solar panels. According to Congressional Research Service guidance, the credit applies to expenditures where installation is completed by December 31, 2025. If you completed solar installation in 2026 or later, it doesn't apply. Unused credit amounts may be carried forward to future tax years if the full credit cannot be used in the installation year.
3. Leasing solar panels
Another option for paying for solar panels is to lease them from a solar provider. With a solar lease, you’ll typically pay a flat monthly fee and often face lower upfront costs than if you financed a purchase.
Some providers even include maintenance as part of the lease agreement.
However, leasing usually isn’t the best choice compared to buying. When you lease your solar panels, you generally can’t claim federal tax credits or other solar incentives, and since you don’t actually own the panels, they won’t increase your home’s value.
4. Entering into a solar panel purchase agreement
Purchase agreements are usually the last option to consider.
With these arrangements, a solar provider installs and owns the solar equipment on your home, then sells you the electricity it generates. While you typically don't have to pay anything upfront, purchase agreements may provide smaller long-term savings than owning a solar system.
Measuring the financial return from solar loan repayment
If you’re thinking about getting a loan to pay for your solar energy system, make sure you factor interest costs into your budget.
Financing your solar panels does add to your overall expenses, but the savings on your energy bills can help you pay back that loan.
To measure the financial return of your financed solar system, you’ll need to compare your combined energy savings over the expected lifetime of the system to the total cost including interest.
Determine the average monthly energy bill for your home.
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Multiply that average by 300 (12 months × 25 years).
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Find the total cost of your solar panel system including interest.
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Subtract the total system cost from the estimated lifetime electricity cost.
Estimated financial return = (monthly bill × 300) − total system cost
This simplified estimate assumes electricity prices remain relatively stable and that the solar system produces consistent energy over its lifetime.
Bottom line on solar panel financing
Financing your solar energy system is a way to make the switch to renewable energy without having to pay for it all at once. Unlike leasing, getting a loan for your solar purchase means you still get to own the equipment once it’s paid off.
You’ve got several options for loans you can use to pay for solar panels. Taking the time to research your available options and finding the best interest rate available to you can save you thousands of dollars in the long run.
If you can only qualify for high-interest loans, though, this would be a reason not to get solar panels.