Investing in solar power can be a major expense. A significant investment that will save you money, in the long run, makes sense, but only if you go about it the right way. There are a few ways you can get financing for your solar power system.
The good news is that options for solar financing have really opened up over the last few years, which means there is competition and prices will be affordable.
What is a Solar Power Loan?
Just like a home improvement loan, the homeowner borrows money from a lender, either a bank or a solar company, and then pay it back with interest through monthly installments. These help homeowners go solar with less of a down payment upfront.
Paying for Solar Power
There are as many options available for buying or leasing your solar power system as there are for solar energy brands. If you are looking at getting a loan, there are several options. Keep in mind, the interest rate affects the total cost of the loan over its lifetime.
Unsecured Loan
Most small, independent solar companies now have access to competitive financing offered through other, larger finance platforms. An unsecured loan means the loan is against your solar panels, not your home.
These loans almost always carry a higher interest but are usually easier to arrange than loans secured against property.
An unsecured solar loan can be offered by private finance providers, like government-funded solar loans or other utility solar loan programs.
These popular loans are widely available and have helped the smaller solar companies take market share from larger companies. They often advertise low rates but what is hidden from consumers is the origination fee of between 10-15% that is built into the solar system price when you ask for a loan through your solar company.
Secured Loans
This is a loan against your home or property. Your home provides “security” to the lender in the event that you can’t repay the loan. If you take out a secured loan, the lender holds a lien on your property and can take possession to pay off the loan if you default.
These loans are offered by credit unions and other national lending institutions. They provide lower interest rates than unsecured loans and the interest is usually tax-deductible.
With Your Solar Provider or Contractor
Your solar provider will likely have several different options for financing available. Be sure to check their rates and any other options they offer very carefully.
Dealer’s Fee
Your solar provider is required to pay a dealer’s fee when they have customers use a solar loan, which can be anywhere from 12%-19% of the total loan cost. In Missouri, it can be much higher. For example, a customer may get a solar loan in the amount of $30,000 would likely pay $5,700 just to be able to utilize the loan.
According to the Truth In Lending (TIL) act, it’s against Federal Law, to offer a customer a cash discount for a solar system if they are offering multiple avenues of financing.
This means the solar company is supposed to absorb the cost of the loan and not pass it on to the customer. Of course, it’s not possible for a company to absorb costs such as these dealer’s fees and still remain profitable.
If you are opting for a solar loan, it’s essentially a given that the costs of dealer fees are being wrapped up in the cost of the project. Solar contractors would go out of business otherwise.
How to get the Best Price on Your Solar System
To get the best price ask a solar contractor to give you a cash-only bid in the beginning. Tell them that you don’t want any other method of financing offered, then they will be able to legally give you a price on a solar system that would essentially have been your cash discounted price.
There are also government incentives and discounts available, but if you are wondering how a financed solar system would stack up, ask them for a second proposal after the first proposal expires.
You could also agree to an addendum that will render the cash proposal null and void. However, your cash price will go up substantially on the second proposal. This is because it’s illegal to offer a cash discount when offering to finance.
If you are considering residential solar panel installation in Kansas City and have questions about financing or any other part of the process, don’t hesitate to contact us, we’re here to help!