Lower Your Energy Bill: 7 Tips for Solar Financing
Renewable energy sources become more available and affordable every year.
The average national cost of electricity in the United States is $110 monthly, or around $1,400 a year. More homeowners are starting to look into the long term cost benefits of solar, but the large upfront cost is a hurdle.
Luckily, there are options for solar financing that can help you get your new system up and running without having to swallow the entire bill in one bite.
1. How Much Solar Do You Need?
Knowing your energy needs is the first step. Are you going to run entirely off solar, or use it as a supplement to your existing electrical?
Look at your monthly energy bill and determine your monthly kilowatt usage. This will give you a basis to start your calculations.
From there, you can look at what each appliance and fixture uses and decide where you can cut usage down. For example, switching from regular lightbulbs to LEDs.
2. What Will it Cost?
Solar is more than just panels – there’s a whole system with other components that have to be scaled to the amount of solar needed. Palmetto mentions that while the cost of solar panels has changed over time, the best metric to think about the average cost of solar in the United States is to look at the dollars per watt ($/W) that you’re going to pay to install a solar power system. Using dollars per watt allows you to compare solar panel installation costs inclusive of things like equipment costs and labor costs, and gives you a total cost number that helps compare one system to another.
Once you’ve calculated your energy needs, you can figure out the requirements for each component and build the system you need. This gives you the amount you need to finance.
3. What Is the Interest Rate?
When looking at solar panel financing, pay attention to the interest rate. Different types of loans come with different interest rates, meaning the total amount you pay is much different.
4. Will I get a Tax Credit?
Keep in mind that you may still be eligible for the solar tax credit, which can put money back in your pocket and offset the cost of your system!
5. Is Your Home Eligible for a HELOC?
This is one of the most popular ways to finance a solar system.
Using your home’s equity, a home equity line of credit (HELOC) allows you to borrow against your home’s value to do improvements and upgrades.
A HELOC generally comes with the lowest interest rate but requires an inspection of your home and a credit check by the bank to qualify.
6. Does the Company Offer Financing?
Many solar companies offer financing to qualified buyers. While the interest rate may be a little higher than a home equity loan, the process is generally faster.
Some companies also supply solar leases, or PPAs (power purchase agreements). These are essentially rent to own scenarios that allow you to get started and buy the equipment as you go.
7. Is a Personal Loan an Option?
As a final option, consider a personal loan.
These will carry the highest interest rates in most cases, especially if they are unsecured. However, if the company you’re working with doesn’t offer financing and you don’t have enough equity in your home to borrow against it, these offer a way for homeowners to get their solar system without needing all the money upfront.
The Best Solar Financing for Your Needs
You have multiple options for solar financing. A good solar company will walk through the process from start to finish with you – from figuring out your solar needs to installation and even financing.
Whether it’s a personal loan, HELOC or solar company financing, a new solar system to upgrade your home is within your reach!