What Are The Solar Financing Options For Homeowners?

Introduction:

Are you planning to put a solar photovoltaic (PV) system on your home but are unsure how to pay for it? Or maybe you're considering whether to buy the system outright or use a financing plan. Perhaps you are unaware of the financing choices accessible to you.

Many homeowners and business owners desire to install solar panels, but the initial price is too high. Frequently, potential clients simply do not have enough savings to afford the cost. Even after taking advantage of the federal solar tax credit, many consumers require a loan to go solar. The good news is that there are several solar loans available with low interest rates and no down payment.

Customers may begin saving right away, even after removing the loan payment, depending on the cost reductions from the solar energy system and the loan installments. Understanding potential clients' lending alternatives is crucial for converting leads into sales and providing exceptional customer service.

What is Solar Finance?

Solar panels capture and transform the sun's energy into electricity. The major reasons homeowners install solar panels are to reduce their power costs and to help reduce greenhouse gas emissions.

Solar financing is intended to assist households in raising the funds required to acquire a solar panel installation. Loans for solar panels allow homeowners to spread out the expense of a solar panel installation over several years rather than paying it all at once. Solar financing allows homeowners to install a solar power system with no money down, allowing your clients to avoid depleting their savings. Your customer will own the solar PV system, as opposed to a power purchase agreement (PPA) or solar leasing. Furthermore, some financial institutions or utility companies offer loans specifically tailored to renewable energy systems, while other more general lending programs may also apply.

Some programs are for home renovation loans, while others are for solar energy projects. Sungage Financial, for example, provides loans for home solar systems with terms of up to 25 years. Greenbiz Financial offers financing for solar PV systems and other energy-saving home improvements. In addition, some solar installers partner with local credit unions to provide solar financing.

How Does Solar Financing Work?

Solar finance is borrowed money used to buy and install solar panels. It can be cash flow positive from Month One, which means that the savings on your monthly power bill from the solar panels can more than cover the monthly loan repayments.

They, like any other loan, have a principal amount, an annual interest rate, monthly payment conditions, and a repayment time. For example, a $20,000 solar loan with a 4.5 percent interest rate and a fifteen-year payback term.

These loans function much like a home renovation loan or a car loan. Loans are available from solar installers, banks, credit unions, PACE program participants, and independent finance organizations, so homeowners' options are expanding all the time. These suppliers are always developing new loan alternatives, making it easier for homeowners to select a loan that meets their specific residential solar finance requirements.

When you obtain a solar loan, you are eligible for the federal solar tax credit. This is worth 26% of overall system expenditures - a significant savings! There are numerous zero-down solar loans available; some require you to use the tax credit to pay off the loan. Most solar loans have repayment terms ranging from 10 to 20 years. Longer-term loans result in lower individual loan repayments, while shorter-term loans result in greater financial savings throughout the life of the solar panels.

How Does A Solar Loan Affect Credit Score?

The lender will consider your debt-to-income ratio and credit score when you apply for a solar loan. These numbers assist lenders in determining if you have a history of debt repayment and can afford to take on further debt.

Solar costs less than what you'd pay your utility company throughout the life of your solar array. Nonetheless, lenders are unconcerned about the fact that solar is not an additional price, which is why many organizations check your credit score before approving you for a loan. The precise influence of your credit score on acquiring a solar loan is determined by how you finance your panels. If you wish to pay for them with a personal loan, you will typically need a credit score of at least 550 to be approved. Borrowers with good credit often obtain the best repayment terms and rates.

Again, if your credit is great, you will be able to apply for personal loans with extremely low interest rates. A low interest rate may save you a considerable amount of money over the life of the loan—even a 1% difference can result in significant savings.

Can You Get A Solar Loan With A Poor Credit Score?

If you don't have a strong credit score, you should postpone your solar panel installation for a few months. Then, take advantage of the time to improve your credit score.

Checking your credit report for inaccuracies, paying off high-interest debt (such as credit card debt), and maintaining a solid payment history by paying your bills on time are all things you can do to enhance your score.

However, if you have a terrible credit score and need solar panels soon, you should check into personal loans for bad credit. This will lower your chances of being denied a loan due to your credit score. Your credit score may suffer even more if you can't comfortably make the monthly payment on the loan you choose.

Government Loans For Solar Panels:

Subsidies for building rooftop PV systems are available from both the Central Government and State Nodal Agencies (SNAs). This encourages consumers to use renewable energy sources and save money on their power bill. Though the initial cost of installing a rooftop PV system is significant, it is less expensive in the long term than electric generators. Rooftop PV systems need no further maintenance once built since they use solar energy rather than fossil fuels.

The Central Government, according to the Ministry of New and Renewable Energy, covers 30% of the benchmarked installation cost for rooftop PV systems. This subsidy is only available to states in the general category. However, in some states that fall under the special category — North MNRE PV Rooftop Cell, — a subsidy of up to 70% of the benchmarked installation cost is available. Uttarakhand, Sikkim, Himachal Pradesh, Jammu and Kashmir, and Lakshadweep are among them. Furthermore, State Nodal Agencies provide subsidies in several states.

This subsidy program applies to the institutional, residential, and social sectors. However, it is not applicable to commercial, industrial, or public-sector enterprises. PSUs are eligible for incentives based on energy generation.

In addition to the subsidy, installing a rooftop solar system provides several other advantages:

• Nationalized banks are offering priority sector loans of up to Rs 10 lakh to those wanting to construct rooftop PV systems. This loan will be classified as a house loan or a home renovation loan.
• Customers would be eligible for generation-based incentives of Rs 2 per unit of power generated.
• Additionally, extra electricity can be sold. They would get a regulated cost per unit based on tariffs established by the government in exchange for this.

Solar Financing Rates:

Purchasing a solar system is similar to purchasing any other good, such as a vehicle. Considering it, the purchase and ownership of mobile phones, vehicles, or residences has been more practical in recent years thanks to the widespread availability of loans and EMI choices. Everyone knows how to buy cell phones, automobiles, and houses on EMI, but do you know how to finance a solar system?

Anyone with a credit card may easily get an EMI on a solar system, but do debit cards have the same option? Around 80 million Indians have bank cards, with roughly 30 million having a Pradhan Mantri Jan Dhan Yojana debit card (ATM card). Only 50 lakh individuals, or around 1%, have credit cards that allow them to pay for solar system installation via EMI.

A solar loan can be obtained in two ways:

Buy Solar Panel On EMI With Debit Card:

Several firms, including SBI, HDFC Bank, Axis Bank, ICICI Bank, Kotak Mahindra Bank, and Federal Bank, have already made it simpler to obtain a loan by allowing customers to review the loan eligibility criteria.

If a potential consumer has an HDFC bank account, he must send an SMS with the text DCEMI to 56767. To send this text message, use the same cellphone number that is registered with the bank. On the same phone, you will receive a response with your loan status. If you are qualified, you will receive a message with your eligibility amount included in the message. Loan acceptance is just 0.02 percent likely, and cardholder approval is based on the bank's internal database and criteria.

Way To Get Home Improvement Loan From The Bank:

A few banks, such as the State Bank of India, provide home repair loans of up to Rs.1 lakh at an interest rate of approximately 8%. The loan is for at least 4-5 years. Such loans are available to customers for the installation of solar systems.

Solar Financing: Yes or No?

Those with the means should first consider purchasing a solar panel system entirely. Cash purchases provide the best return on investment. Most homeowners, however, do not have that kind of cash. For those people, we propose looking into solar loans as a method to purchase solar panels with little or no upfront payment.

Even after deducting loan interest, homeowners may generally receive a good return on their investment. They will also profit from increasing property prices, less dependency on the grid, and a lower carbon footprint. As with any significant personal financial choice, look around to ensure you are receiving the greatest value for your circumstances.