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How Solar Loans Work and What Option is Best for You

Before installing a solar system, you must choose how you plan to finance the purchase. Solar loans and leases are the two options you have. In one case, you own the system and are eligible for financial incentives. In the other case, you reap the benefits of a solar system without having to pay for or maintain it. No option is necessarily better than the other. You must weigh the pros and cons to both and consider your short- and long-term energy needs.

In this post, let’s focus on how solar loans work and which type of financing is best for you.

Unsecured or Secured Loans

Not all solar loans are the same. They have different terms, conditions, and interest rates. One of the first questions to ask is whether you want a secured or unsecured loan. A secured loan requires some type of collateral. In most cases, this will be your home. An unsecured loan does not require collateral. However, these loans may have hidden or undisclosed fees.


A secured loan is a good option if:

-You don’t mind using your home as collateral

-Long-term value of the loan is most important

-You want the greatest financial benefits from your system

-You can wait a few weeks to take out the loan


An unsecured loan is a good option if:

-You are not comfortable using your home as collateral

-You want to install the solar panel system immediately


Monthly Payments

The next big question to consider is how much you can afford each month. Solar loans with longer terms have smaller payments but more interest. If you’re on a tight budget each month, paying out more in interest may be worth the smaller payments. The other option is a solar loan with shorter terms and bigger payments, but less interest paid out.

Remember, solar loans operate just as other loan products, so don’t be afraid to shop around for various loan structures, terms, and conditions. It’s possible that with a competitive loan and savings on electricity, you can afford a shorter term loan.

If, after reviewing solar loan options, you discover that a loan isn’t right for you, consider leasing a solar system instead. Solar leases require no upfront investment and still offer savings of 10 to 30 percent each month. For more information, discuss your options with a qualified solar consultant from AllSeason Solar.