A typical solar system can set you back up to $15,000 – even more if you want to install solar battery storage as well. While some people can afford to pay for solar upfront, many of us will look to a range of finance options for assistance. In this article, Canstar Blue looks at some of the best ways to finance your solar panels.
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6 ways to finance your solar panels:
Green Loans
Green loans are unsecured personal loans offered by certain institutions to customers purchasing environmentally friendly products like solar panels, batteries and hot water systems. Green loans generally have lower interest rates and fewer fees compared to personal loans, but check this in the fine print.
If you can’t afford to pay cash up front, green loans are widely considered the next best option. If there is a downside to green loans, it’s that there are usually some pretty stringent eligibility requirements. Some institutions will only finance approved solar products and will only approve loans to applicants with a good credit score.
Institutions offering green loans include:
- HandyPay
- Bendigo Bank
- Commonwealth Bank
- Community First Credit Union
- Plenti
- Regional Australia Bank
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Most ideal for: Pretty much anyone with a good credit score.
You can check your credit score for free here.
Interest Free Solar Loans
Many solar suppliers say something along the lines of “Get solar today for no upfront cost and no interest on repayments”. It sounds too good to be true, and that’s because it usually is. Interest free loans might not include interest, but to cover the finance company’s merchant fees, the supplier or installer will typically increase the quoted system price by around 15 per cent to 25 per cent. So while you’re not paying interest, interest free loans will often result in customers paying considerably more.
No interest solar financers tend to have much higher approval ratings compared to average lenders. If you have poor credit, you’re probably ineligible for a low cost green or personal loan and an interest free loan could be your only option.
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Most ideal for: Interest free solar loans should generally be avoided unless you have poor credit and can afford the higher monthly repayments.
Personal Loans
Personal loans are a safe, middle of the road option to finance a solar system. If you shop around, you may be able to find a reasonable personal loan rate and some lenders may factor in the purpose of your loan to give you a better deal. If you’re a bit of an optimist, the higher interest rate could incentivise you to pay off your loan faster, potentially coming out the other end better off than if you took out a green loan. It’s also easier to receive approval for a personal loan compared to a green loan.
Unlike some green loans which require you to have sourced a solar system before the loan is paid out, personal loans are pre-approved, meaning you have the cash-in-hand to negotiate a better price when you buy the solar panels.
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Most ideal for: Customers with reasonable credit scores and are financially savvy enough to find a value personal loan. They may also also a great option for those dealing with solar suppliers that will negotiate down their price for upfront payment.
To compare personal loans, visit Canstar.com.au.
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Add Solar to your Mortgage
Given how low mortgage rates are currently, borrowing more against your home to pay for a solar system could be a sensible way to finance solar panels. Mortgages obviously take a long time to pay off however, and adding more debt could leave you paying a lot more for solar in over the life of the mortgage. Paying off solar this way is therefore a bit risky and you shouldn’t do it unless you have a comfortable understanding of your finances or you’ve received independent financial advice.
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Most ideal for: Homeowners with sound financial knowledge and discipline to repay the mortgage as quickly as possible.
Manage your home loan with Canstar’s mortgage calculator.
Solar Leasing
Solar leasing – sometimes called ‘rent-to-own solar’ – is an agreement whereby your solar system is supplied and installed with no upfront costs. It is then paid off in fixed monthly repayments. The key difference between this and a loan is that when you lease your solar panels, you don’t actually own them until they’re fully paid off. You will however be required to pay the outstanding balance and take ownership of your solar if you decide to move house as panels can’t easily be removed and reused.
Solar leasing is often marketed as having low monthly repayments which are less than the savings you’d make with solar. It’s an appealing proposition, but customers should be wary of the interest rate. Solar leases sometimes have comparably high interest rates which can hurt your hip-pocket long term.
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Most ideal for: Large, commercial solar systems where the savings will easily outweigh the accrued interest costs over the life of the system.
Solar Power Purchase Arrangements
Under a solar power purchase arrangement (solar PPA), an operator installs panels on your roof for free. In return, the operator retains ownership of the panels and you agree to buy the solar power produced from these panels at a rate less than what you’d pay from the grid. For example, an operator could charge you 18c/kWh for the solar power while the grid price for electricity could be 28c/kWh.
Solar PPA’s generated a lot of excitement when they first popped up, however a number of critical issues with this setup have been found since then. The biggest issue is that PPA’s only work if you can use or store all the solar power generated by the panels. If solar power is not used immediately then it’s fed into the electricity grid in exchange for a feed-in-tariff. If you’ve paid 18c/kWh for that solar power, but receive a lower feed-in tariff, say 10c/kWh, then you’re essentially 8c/kWh out of pocket for nothing.
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Most ideal for: Large, commercial solar systems where the savings will easily outweigh the accrued interest costs over the life of the system.
Solar Plans & Prices
Here are some of the cheapest solar-specific deals from the retailers on our database. These costs are based on the Ausgrid network in Sydney but prices will vary depending on your circumstances. We show one product per retailer, listed in order of lowest price first. Annual price estimates assume general energy usage of 3900kWh/year for a residential customer on a single rate tariff. Price estimates exclude solar feed-in tariff credits. These are products from referral partners†. Our database may not cover all deals in your area, and please check retailer websites for up to date information.
Here are some of the cheapest solar-specific deals from the retailers on our database. These costs are based on the Citipower network in Melbourne but prices will vary depending on your circumstances. We show one product per retailer, listed in order of lowest price first. Annual price estimates assume general energy usage of 4000kWh/year for a residential customer on a single rate tariff. Price estimates exclude solar feed-in tariff credits. These are products from referral partners†. Our database may not cover all deals in your area, and please check retailer websites for up to date information.
Here are some of the cheapest solar-specific deals from the retailers on our database. These costs are based on the Energex network in Brisbane but prices will vary depending on your circumstances. We show one product per retailer, listed in order of lowest price first. Annual price estimates assume general energy usage of 4600kWh/year for a residential customer on a single rate tariff. Price estimates exclude solar feed-in tariff credits. These are products from referral partners†. Our database may not cover all deals in your area, and please check retailer websites for up to date information.
Here are some of the cheapest solar-specific deals from the retailers on our database. These costs are based on SA Power network in Adelaide but prices will vary depending on your circumstances. We show one product per retailer, listed in order of lowest price first. Annual price estimates assume general energy usage of 4000kWh/year for a residential customer on a single rate tariff. Price estimates exclude solar feed-in tariff credits. These are products from referral partners†. Our database may not cover all deals in your area, and please check retailer websites for up to date information.
Government Solar Loans
The Australian Government’s no interest Green Loan program was closed to new applicants back in 2010. Although there are some solar rebates, there are currently limited government solar loans available to residential and small business customers. As power prices begin to rise, some state governments have considered introducing their own green loans program. The NSW government for example has introduced The Empowering Homes Program, which includes large discounts for homes looking to install or upgrade their solar systems.
What’s the best way to finance solar?
The best way to finance solar will depend on your personal situation and it is ultimately up to you to decide what’s best for your needs. Personal loans are a safe bet, but consider a low-interest green loan if you can. While solar can be a great investment, its savings aren’t guaranteed. So if you have a poor credit score, it might not worth risking a bad finance deal to get solar. For more information on solar, including Canstar Blue’s solar company satisfaction ratings, check out the link below.
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