Financing for home solar panels?

What are the different solar finance options?

If your funds are tight and you just got hit with a high electricity bill, you may be wondering how you can finance solar panels since the temptation to say: “Will solar be able to lower my cost of living pressures?”  The answer is a clear YES – a solar system can reduce one’s electricity bill by at least 50% and often significantly more if a few guidelines are followed. They are:

• You use the majority of your electricity during the day;
• The system is appropriately sized for your consumption;
• The system has no issues with shadowing or poor maintenance;
• You have purchased a quality system, not a nasty budget solar system, which will only give you trouble over the years.

Now this information below is NOT giving you any financial advice, and it is always recommended you make your independent inquiries.

So we have established that although solar can be financially beneficial for homeowners in the long-term, they carry a high upfront cost. For many households, the finances may not be available to purchase a system upfront.

Luckily, several financing options for solar may make purchasing a system more viable.

Green loans

The first way an individual can afford a solar system is through a Green Loan. Certain financial institutes offer unsecured personal loans to customers purchasing environmentally friendly products such as solar systems.

These loans generally have a lower interest rate and fewer fees. In addition, they can be structured over several years to the point that the repayments are less than the solar savings, so the purchaser has a financial benefit right from day 1.

Green loans have strict eligibility requirements, and one needs an excellent former credit score. Some examples of institutions that provide Green loans and other forms of solar panel finance are:

• Bendigo Bank
• Plenti
• Brighte
• Bank Australia
• Commonwealth Bank
• Firstmac, and
• many Credit Unions

Please note that these arrangements change regularly, so please inquire with your financial institution.

Solar leasing

Another common way for Australians to reap the benefits of a solar system is through a process known as solar leasing. Also known as rent-to-own solar, this process is where you install a system with no upfront costs and then pay it off in monthly instalments.

This differs from a loan, as you don’t actually ‘own’ the panels on your roof until you have finished paying off the instalments. This is usually a more viable option for those purchasing a large or commercial system where the savings will easily outweigh interest costs over the system’s life.

Redraw your mortgage

The most common way many Australians can afford solar without paying upfront is by adding the system to their mortgage. Borrowing against your home to pay for a solar system is a wise option for many, as mortgage interests are usually much lower than interest rates on loans.

However, this option should only be taken if the homeowner understands their finances; otherwise, if you are slow to pay off your mortgage, you may end up paying more for the system long-term.

Solar power purchase agreement

Solar Power Purchase Agreements are the final method of financing a solar system purchase instead of cash. This is where an operator installs a solar system on your roof for free. The operator then owns the panels, and you, as the homeowner, buy the produced power at a lower rate than the grid.

However, the main issue with this purchase is that if the solar power is not used during the day as it is generated, the homeowner will struggle to make a great long-term profit from solar. So this is a worthwhile option for people who use electricity at home.

Most quality solar companies can offer a finance option as part of their system sizing and design process. Simply ask about the finance options for solar panels or have a look at our finance calculator.

One final golden rule – do not buy a cheap solar system on finance. Affordable solar tend to disappoint, with inferior panels and inverter solutions not standing the test of time. Moreover, it would be a bad situation when one still has to pay off a system that has stopped working. So go for a quality system instead and get a better long-term financial benefit.