You’re ready to do your part for the planet by installing solar panels on your home, but it can be expensive to buy them and get them installed. Even if you know you’ll save money over the long term, that doesn’t necessarily help you find the cash to buy them today. So, are solar panels worth it—and what are your solar financing options?
When it comes to buying solar panels, there isn’t a fixed cost. How much it will cost you will depend on how many you buy. As of January 2019, it’s estimated that the cost is typically around $3 per watt.
Since the average buyer installs a 6,200 watt system, the costs are around $18,600 per system. However, if you decide that you need more watts because you have a bigger family or a bigger home, solar panels can cost you more.
Similarly, if you have a smaller family or a smaller home, solar panels might cost you less. Either way, buying solar panels is pretty expensive, and it may require some kind of solar power financing to purchase panels.
The Benefits of Solar Panels
One of the main benefits of installing solar panels is that you can potentially reduce or completely eliminate your energy bills . Depending on how much sunlight there is where you live, how many panels you install, and your energy use, you could potentially receive enough power to completely meet your needs.
That could result in significant savings—especially if you live in an area where power is expensive. Given that the average annual energy costs are $3,052 per person , that could translate into significant savings—especially if you have more than one person in your household.
Even with the cost of solar panels, the expense of the purchase can be quickly earned back over a few years. The amount that you’ll save over the life of your panels can really add up.
Another benefit is that solar panels have the potential to increase the resale value of your home. Research has shown that the resale value goes up $5,911 per installed kilowatt .
Solar panels are also known to extend the life of a roof since they shelter the roof and protect it from damage in storms and everyday wear and tear.
One of the biggest benefits, however, is knowing that you’re using renewable energy and helping to reduce greenhouse gasses. This could be especially important to you if you live in a state where the majority of the energy generated is through coal or other non-renewables.
The Downsides of Solar Panels
While solar panels can save you a lot of money and do a lot of good for the planet, not everyone buys them. One of the big reasons is that they can’t afford the upfront cost. While solar power financing can help make solar energy possible for more people, not everyone qualifies.
Another downside of solar energy is that how much you can save on energy depends entirely on the weather.
If there is an overcast day 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.
You also can’t collect energy at night. For that reason, other kinds of renewable energy alternatives like wind or thermodynamic energy might be a better fit for your home.
It’s also hard to store solar energy that isn’t used right away. While you can buy batteries, they can be expensive. That adds additional expense to your solar energy system.
Solar energy also uses a lot of space, so make sure your roof is large enough to have enough panels to power your entire home. If you choose not to put them on your roof, they will take up space in your yard.
Solar Financing Options
1. Tax Credits and Rebates
Any solar power financing strategy should include the use of all available tax credits and rebates. The bad news is that tax credits at the federal level have expired. The good news is that many states offer rebates that further reduce the cost. To find out more about what’s offered in your area, check out this list .
On top of that, many states also offer what’s knowns as Solar Renewable Energy Credits (SRECs) . You can sell these credits to utility companies throughout the year.
If you generate excess energy, you can also potentially sell this back to the grid, which is also a key part of any solar panel financing strategy. While that won’t pay for your panel up front, it should help you cover part of the costs of solar financing. Check with a tax professional to see if you are eligible for any of these benefits.
2. Solar Panel Leases
One unique strategy for solar panel financing is to lease your solar panel. With a lease, a company typically pays to install the panels on your roof and charges you a monthly fee over the term of the lease. The company owns the panels and remains responsible for any maintenance required on them.
Solar panel leasing may be a good option for those who struggle to find solar panel financing or don’t qualify for a solar panel loan.
3. Secured Solar Panel Loans
Since you are adding to your home, you may opt to use a Home Equity Line of Credit (HELOC) in order to buy solar panels. This is a type of revolving credit line that is secured by your home equity. Because it is a secured loan, you may qualify for a relatively low interest rate. However, if you fail to pay it back, the lender can come after your home. Also, you need to have home equity in order to qualify for a HELOC. For these reasons, you may prefer other types of solar panel loans.
4. Unsecured Solar Panel Loans
An unsecured solar panel loan is just a personal loan that you can use to purchase solar panels. These solar panel loans don’t require that you have home equity; to qualify, the lender looks at your income and your credit rating (among other financial factors that vary from lender to lender). As unsecured loans are installment loans, you may seek out a term length for your loan in order to ensure that repayment fits your budget.
Let the Sun Shine
Solar panels are great for the environment. They may cost more up-front, but over time they can save you money on your electricity bill. Exhaust all your options before deciding if solar panels are right for you.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.