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In a previous article, we discussed getting solar tax credits. One of the conditions is that the homeowner cannot lease the solar panel installation. In a separate article, we asked why electric utilities were embracing solar. Particularly, why they are offering solar loans. Clearly getting solar panels installed is getting easier than it has been in the past. But what things should you know when it comes to financing solar panel installations? Specifically if you want to take out a solar loan?

The Good

Because we’re talking about loans, we have to discuss secured vs unsecured.

With secured loans, you have the benefit of receiving the renewable energy tax credit. It also means the interest is tax deductible. If you chose a secured loan, your interests rates will be low, possibly between 3.5% and 5.5%. FHA Title 1 secured loan interest can range from 5% to 7.5%.

There are differences between secured vs unsecured solar loans. As you might expect, secured loans require collateral. It’s also what allows the banks to offer lower interest rates. Unsecured loans force the rates higher. In both instances, the bank will say your monthly payments will be lower than your current electric bill. Make sure this is true in your case before signing on the dotted line.

Unsecured loans don’t grant the benefit of the tax credit. It can also cost a lot more – as much as 10% in interest. Secured loans are usually home equity loans or lines of credit and use your house as collateral, which is why the interest is tax deductible. FHA Title 1 Secured Loans are guaranteed by the government.

The Bad

Finding a bank is not as easy as you might think. Depending on your financial situation, the easiest way to go might be to get a home equity loan or a line of credit. If that option doesn’t appeal to you, then you’ll have to search for a bank that will issue you the loan. Below we have a list of a few banks and a highlight of their terms.

The Ugly

As uncomfortable as it is, we have to talk about the ugly side of getting a solar loan. Since no one can predict the future, there’s no way to know if your job will still be around in 10 years or if an illness will cause financial strain. So what are some of the ugly aspects?

For secured loans, because they usually are home equity loans or lines of credit, it means if you default, the bank can foreclose on your house. You have to ask yourself if this is worth the risk. The exception is the FHA Title 1 Secured Loan. In the case you can’t pay it back, a lien is placed on the property and is paid when the house is sold.

Unsecured loans don’t use your home as collateral. That doesn’t mean the repercussions aren’t just as high as secured loans. If you fail to keep up with the payments for unsecured loans, it can affect your credit score. That can become a big deal the next time you go to buy a car need a loan for something else.

Banks That Offer Loans++

At this point, we’re going to try to help you get moving by showing you four different banks with a highlight of their terms. As a disclaimer, SimpleSolar.info has no affiliation with any of the institutions listed and receives absolutely no compensation of any kind from them.

Wells Fargo

  • Loans for transactions of $500,000 and above
  • Fixed or floating rats for up to 10 years
  • Finance up to 100% of equipment cost

First Green Bank

  • 5.95% fixed rate – 6.096% APR
  • 20 year repayment term
  • Finance up to 100% of equipment cost

Paradise Energy Solutions

  • 12 year term at 2.99% or 20 year term at 5.99%
  • Max loan amount of $40,000
  • No repayment penalties
  • 100% financing available

Admirals Bank

  • Non-equity based loans
  • Must be paid with other general home improvements
  • Including roofing, window, energy efficiency solutions, garages, etc
  • Fixed rates, no repayment penalties

 

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