Financing plays a big part in the decision to go solar. Luckily, a variety of financing options exist to help make purchasing a solar panel system easy and affordable. In this article, we’ll go over a number of common financing options we offer at Palmetto, as well as some outside lending options that customers may also consider.
Palmetto Solar Financing Options
Before we detail the financing options available to Palmetto Solar customers, let’s look at a breakdown of how Palmetto Solar customers choose to purchase solar today.
- More than 80% of Palmetto customers finance their solar energy system with a solar loan and no money down.
- Nearly 5% of Palmetto customers pay cash, and own their system outright before the electricity savings begin.
- Some homeowners choose to self-finance their purchase with a home equity loan or personal line of credit.
Compared to the other types of solar financing available, a cash purchase is the quickest way for you to see monthly savings from your solar panels. This is because you will own your system outright by the time your system is activated, so get to enjoy the full value of your monthly electricity savings without a loan payment to manage.
While cash is the quickest path to savings, cash purchases require significant upfront capital, as you will be paying the full value of your system before it can begin generating power. At Palmetto, we offer a four-part payment schedule for all cash purchases:
- $900 is due at signing.
- The remaining balance can be paid in equal thirds.
- ⅓ at Permits Received
- ⅓ at Installation Complete
- ⅓ at Permission to Operate
Since cash buyers own rather than lease their solar system, they may be eligible for financial incentives, such as the Residential Clean Energy Credit, which allows homeowners to deduct 30% of their solar system and installation costs from their total tax liability for the year of purchase. If your 30% credit is higher than your total tax liability for the year of purchase, the difference can be rolled over to subsequent years. Note that not everyone is eligible to receive financial incentives and any questions regarding eligibility should be directed to your tax advisor.
Another financing option we offer at Palmetto is a solar loan. Compared to other loan types, solar loans are designed specifically for the financing of home solar energy systems. Such loans typically have greater flexibility baked into them, averaging 20 to 30 years instead of a few years, as sometimes seen with more traditional loan options.
This extended term length is purposeful, as the loan period directly relates to the average lifespan of a solar panel system. Instead of paying a higher loan payment over a shorter period of time, the monthly payment is lower and extended, allowing customers to pay it off on their own time, whether that’s across the full life of the loan or within a shorter period.
Like a cash purchase, homeowners who choose to finance their solar energy system may be eligible for financial incentives to help offset the cost of their system. In fact, most solar loans assume that you are eligible for the 30% Residential Clean Energy Credit and apply the full value of your savings towards your solar loan in or prior to month 18 in order to maintain a fixed monthly payment for the lifetime of your loan.
Solar loans will automatically reamortize in month 19 to reflect the remaining principle. Your monthly loan payment for the remainder of the loan will be adjusted based on the remaining principal at that time.
- If you pay more than approximately 30% of your total loan amount in or prior to month 18, your monthly payments for the remainder of the loan will be adjusted to a lower amount.
- In order to avoid an increase in your monthly payment, you must make one or more voluntary prepayments equal to approximately 30% of your total loan amount within 18 months following your loan start date.
It’s important to note, however, that not everyone is eligible to receive financial incentives, including the Residential Clean Energy Credit. Any questions regarding eligibility should be directed to your tax advisor.
At Palmetto, we offer a diverse range of loan products with fixed interest rates that can meet the needs of most people’s financial situations. Click here to get a free quote and to learn more about our loan offerings.
Cash vs. Loan Comparison
|Higher upfront costs||Get started with no money down|
|Greater long-term savings||Greater flexibility on payment schedule|
|Pocket your monthly electricity savings||Monthly payments as low as $85/mo|
|Own your system outright||Select from multiple loan options|
|Four-part payment schedule
||10-30 year terms
Must pay 30% in or before month 18 to avoid an increase in your monthly loan payments
|2.9% processing fee||0-7.99% APR, may include financing fees|
|Credit application not required||Credit application required|
|Eligible for the Residential Clean Energy Credit||Eligible for the Residential Clean Energy Credit|
|Concerned about the upfront costs?
While the upfront costs may be prohibitive, homeowners who have the funds available and choose to pay cash will save more over the lifetime of their solar energy system.
|Concerned about 12-30 year loan terms?
While solar loans are designed to optimize monthly savings by spreading payments over the lifetime of your solar energy system, the average U.S. solar loan is either bought or paid off in less than 6 years.
Planning to move?
Solar-powered homes sell for 4.1% more on average than comparable homes without solar power, allowing homeowners to pay down any costs not yet covered by their electricity savings.
Alternative Solar Financing
While the vast majority of Palmetto homeowners opt for a solar loan, some choose to finance their system independently or through an alternative means, like a lease. Here are some common options that may be available to you.
Home Equity Line of Credit
A home equity loan or line of credit, sometimes known as a second mortgage, allows you to borrow money against the equity in your home—the difference between what you owe on your mortgage and your home’s current value. For example, if you still owe $200,000 on your mortgage but your home is currently worth $300,000 then you have $100,000 worth of equity in your home.
Home equity loans are secured loans, meaning the lender places a lien on your property. While never guaranteed, secured loans are generally known to have lower interest rates than unsecured loans, which mostly use credit scores instead of collateral to determine eligibility and terms. However, since your loan is secured by your house, if you fail to make payments per the terms of your loan, then the lender reserves the right to repossess your home.
Most solar loans, on the other hand, are typically unsecured, meaning that the loan is on the solar energy system rather than the home. However, this is something we recommend you confirm with your lender and/or solar installer before proceeding.
Personal Loan/Line of Credit
You may also consider a personal loan or line of credit, such as a home improvement loan. Customers might choose a personal loan for lower interest rates, which will depend on their personal financial situation and lender. Others may choose to go this route because they simply don’t want to or don’t qualify for a solar loan. There are also some who opt for a personal loan because they don’t want to take out collateral on their home.
These loans typically have a shorter payback period than solar loans (which average 20 to 30 years), therefore their monthly payments may be higher depending on your term length.
Solar Lease & Power Purchase Agreement (PPA)
Solar leases and PPAs offer a way for homeowners in certain states to benefit from solar energy without having to own and maintain a system. Leases and PPAs are ideal for those who:
- Do not qualify for financial incentives and tax credits
- Don’t want to own, monitor, and maintain a system
- Still want more stable, predictable electricity costs
Though there are subtle differences, leases and PPAs typically work the same:
- A customer locks in a fixed monthly payment for a period of time
- The third-party solar company is responsible for maintaining the system
- You do not own the system; the solar company does
- You are not eligible to receive financial incentives; the solar company may
Speak with a financial consultant
There are many options when it comes to financing your solar energy system. Whether you want to pay with cash, loan, or another option, your Palmetto Sales Representative or our Palmetto Support team can help you break down the options so you can make an informed decision.