Residential solar systems can cost up to $35,000 for tier 1 equipment, which is money many of us can’t just aren’t comfortable spending in one place. Even with tax incentives and rebates, the price tag can still be a little bit intimidating.
Is it better to pay cash or finance solar panels? Will interest rates just make solar more expensive in the long run? In this article, we’ll dive into the details.
Paying Cash for Solar Panels
Of course, you can only pay cash for solar panels when you have money that covers the costs readily available. Although it is the more straightforward of both options, a cash payment can leave a large hole in your bank account, and recouping the money spent could take some time.
Pros
- Cash payments for solar panel installations are less expensive in the long run as you avoid paying interest on the primary cost.
- The purchase process is simpler and you never have to worry about factors like creditworthiness that affect the success of your loan application.
- You enjoy the effects of your energy savings and net metering credits immediately after you install your solar panels. You never have to redirect money towards loan repayment.
- You have more control over the design or type of solar system you can install
Cons
- Some additional costs can be harder to take care of. For example, if you want to earn more net billing credit on your solar installation by adding more batteries to your setup, taking out that extra money alongside the base cost of the solar system is difficult.
Who should go for cash payments?
Are you planning on footing medical bills, mortgage payments, or any other important expenses in the near future? If yes, then cash payments may not be the best for you even if you have the money. Cash payments are great for individuals who have a steady and substantial flow of income — income that can easily take care of the costs of installation without discomfort.
Financing Solar Panels
Financing is a viable option if you don’t have cash for the full cost of your solar panels readily available. Now, with solar financing, you have a plethora of options to choose from.
You can opt for home improvement loans from popular lending institutions around you, with some like Fannie Mae Homestyle Improvement loans even providing options specifically dedicated to energy-efficient upgrades. Your other options include home equity and HELOC loans, cash out refinance loans, or even secured and unsecured personal loans. However, it’s a bit discouraging that these loan options typically have difficult eligibility criteria.
Thankfully, solar providers like us also provide financing services. Your loan options are more easily accessible, adequate, and beneficial than regular lending institutions. When taking out a loan, however, ensure that your monthly payments don’t exceed your expected energy savings, as this may put you in a tight spot.
Pros
- Financing allows you to own a solar system even if you have only a fraction of the money.
- You don’t wait before you start saving on energy costs
- Financed solar panels immediately add more worth to the value of your home
Cons
- Financing solar panels is more expensive in the long run due to the interest on the loan
- You may not meet credit score requirements
- Buying your solar system generally takes longer due to processes around application approval, determining repayment terms, and disbursing funds
- You have to constantly worry about making repayments, which is worse when your energy savings don’t fully cover monthly payments
- You may be offered limited loan terms, such as the $3,500 limit with the Fannie Mae homestyle improvement loans for example.
Who should go for solar panel financing?
Financing solar panels is a great option if you can’t comfortably afford the full cost of your desired solar setup. Even if you don’t have a great credit score, you may go for Federal Housing Authority (FHA) home improvement loans which have less stringent qualification criteria and repayment terms.
Solar Optimum Can Help
Making the right choice when buying your solar panels means selecting the option that best suits your financial situation and goals. A cash payment is great if you can comfortably afford your preferred solar panel setup up front while financing solar panels is the better option if you only have a fraction of the cost.
Solar Optimum has the solutions for you regardless of what benefits you more. Get your solar panels bundled with batteries through direct cash payments, or finance your purchase through our customized loan programs. Contact us now for a quote.
