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Installing solar panels on your home allows you to do your part for the planet while also reducing your monthly utility bills. However, the cost to purchase panels and have them installed can be a deterrent. Even if you know you’ll save money over the long term, it may be hard to come up with the funds to pay for the project up front.
Fortunately, there are tax incentives as well as financing options that make paying for a solar system a lot more manageable. Solar financing involves using instruments, such as loans and leases, to pay for a solar system in installments over time rather than in one lump sum at the time of purchase. Each financing option has different features, advantages, and drawbacks.
Read on to learn more, including how much solar panels cost today, how much they can help you save, and what solar financing options can help you cover the initial bill.
Key Points
• Solar panels can significantly reduce or eliminate energy bills and increase home resale value.
• Financing options include tax credits, leases, a secured home equity loan, or an unsecured personal loan.
• The cost of a solar system can vary by location, type, and size, but the average cost is $20,534.
• Home equity loans provide low interest rates but require you to have sufficient home equity.
• Solar leases offer the potential to save on your monthly energy bill but do not provide tax benefits.
The Cost of Solar Panels
The cost of solar panels varies by location, the type of solar panels, and the system’s size, but the average cost of a residential system is currently $20,534. The actual cost of solar panels can vary greatly depending on location, house features, and size of system. However, state and local tax incentives and rebates can lower the cost.
There are also different financing options available that allow you to pay for a solar system in installments rather than in one lump sum up front. The monthly amount owed on a solar loan can be less than an average utility bill.
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Potential Benefits of Solar Panels
While solar panels have the potential to save homeowners money and do a lot of good for the planet, they come with a high price tag. Solar power financing can help make solar energy possible for more people, but not everyone qualifies.
Even if your solar panels don’t eliminate your electric bills, they can lead to significant savings. Generally, the initial expense of the purchase of a solar system can be recouped in 5-15 years, depending on energy costs in your state. After recouping installation costs, the amount you’ll save over the life of your panels will continue to add up.
Another benefit of solar panels is the potential to increase the resale value of your home. Research has shown that homes with solar panels can sell for 5%-10% more than those without them.
For some people, one of the biggest benefits of installing solar panels, however, is knowing that they’re using renewable energy and helping to reduce greenhouse gases. This could especially be important for those living in a state where the majority of the energy generated is through nonrenewable power sources.
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Potential Drawbacks of Solar Panels
While solar panels have the potential to save homeowners money and do a lot of good for the planet, they come with a high price tag. Solar power financing can help make solar energy possible for more people, but not everyone qualifies.
Another drawback to solar energy is that it is sunlight dependent. If there is a long stretch of overcast weather, or if you live in an area that doesn’t get a lot of sun, you might not be able to generate enough solar energy to take care of your energy needs. However, solar batteries (which store excess energy) can help mitigate this issue.
Solar panels and the wiring they require can also use up a significant amount of space. Depending on how many panels you need for your home, it can be difficult to find adequate space with sufficient sun exposure to install a solar system.
Also, keep in mind that uninstalling a solar system and moving it can be difficult and costly. As a result, a solar system is not something you can generally take from house to house. It’s best to consider it as an investment in your home.
Saving Money by Installing Solar Panels
More than six million homeowners in America currently have solar panels. One reason is the savings it can offer over time. Once installed on your roof, solar panels typically last for more than 25 years. Hypothetically, if your solar system eliminates your electric bill and you normally spend about $150 a month on electricity, that would bring in a potential savings of $45,000 over the life of the system.
Keep in mind, however, that solar panels don’t always eliminate your electricity bill. And, as with any home improvement project, it’s important to consider the upfront costs, how long you plan to live in your home, and if you can find home improvement financing options that work with your budget.
Four Options for Solar Panel Financing
While converting to solar can pay for itself over time, it requires a sizable upfront investment. Here are some options that can help make it easier to foot the bill.
1. Tax Credits and Rebates
A smart solar power financing strategy starts with taking advantage of all available tax credits and rebates. The federal government offered a 30% tax credit for solar panels that, unfortunately, expired on December 31, 2025. But if you installed solar panels before that date, you still qualify for the tax credit.
Unlike a deduction, a tax credit is an amount of money that you can subtract, dollar for dollar, from the income taxes you owe. So, if you pay $30,000 to install a new solar system, you’ll qualify for a roughly $9,000 tax credit, which equates to $9,000 more in your pocket.
In addition, many states offer rebates that further reduce the cost. To help people learn more about state and local incentive programs, North Carolina State University’s NC Clean Energy Technology Center offers a nationwide directory of programs.
2. Solar Panel Leases
A unique option for solar panel financing is a solar lease or power purchase agreement (PPA). With a lease or a PPA, a company installs the solar system on your roof, and you pay that company for your energy each month, which is typically 10%-30% lower than your usual electric bill. The company owns the panels and remains responsible for any required maintenance.
Since you don’t own the solar system, however, you can’t take advantage of any tax rebates or other incentives that come with purchasing solar panels outright. Also, solar lease and PPA contracts can extend for 20 years. If you want to move before the contract is up, you would need to find a buyer who wants to take over your contract or could end up paying a hefty cancellation fee.
3. Secured Solar Panel Loans
Since you are adding to and improving your home, you might consider using a home equity loan or home equity line of credit (HELOC) to finance solar panels. This type of financing is secured by the equity you have in your home. Because the debt is secured (which lowers the risk to the lender), you may qualify for a lower interest rate. However, if you are unable to repay the loan or credit line, the lender can take your home to recoup its losses. Also, you need to have equity in your home to qualify for a home equity loan or HELOC.
4. Unsecured Solar Panel Loans
An unsecured solar panel loan is an unsecured personal loan that you can use to purchase solar panels. You don’t have to have any equity in your home or use your home as collateral to qualify for an unsecured solar panel loan. To get approved, the lender considers your income and your credit rating (among other financial factors that vary from lender to lender).
With an unsecured personal loan, you receive a lump sum up front, which you can use for virtually any type of expense, including solar panels. These loans typically have fixed rates so your monthly repayments stay the same over the term of the loan, which is often one to seven years. Because this type of solar panel financing is unsecured, rates can be higher than you might get with a home equity loan or HELOC.
The Tax Benefits of Solar Panels
There was a 30% federal tax credit for solar panel systems installed between 2022 and 2025. That is no longer available, but there are still state-level solar incentives and policies, which vary widely. You can look up what’s available in your area in the DSIRE database, operated out of North Carolina State University. Your local utility may also offer clear energy incentives, which can help you save money on solar panels.
The Takeaway
There’s no question that solar panels are environmentally friendly. Over time, they can also be economically friendly, saving you money on your electricity bill. Doing some research about residential solar panels and general home improvement financing is a good step to take to see if it’s the right choice for your home.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.
FAQ
How much does it cost to lease a solar panel system?
According to Consumer Affairs, the average lease cost for solar panels runs between $150 and $250 per month. The amount you’ll pay will depend largely on the size and production of the system.
How much can you save using solar panels?
According to Consumer Affairs, the average homeowner saves $25,000-$90,000 over the 25-year lifespan of their solar panels. However, savings depend on a number of factors, including where the home is located, the size of the system, and the roof position.
Is there a tax credit for installing solar panels?
Currently, there is no federal tax credit for newly installed solar systems. The previous tax credit ended under the One Big Beautiful Bill Act of 2025. However, there are various state-level tax incentives.
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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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