When it comes to paying for your solar panels, most homeowners take one of two routes: pay cash or take out a solar loan.

Both payment options have their positives and negatives, but how do you know which payment option is right for you?

Let’s take a look at the difference between paying cash for your solar panels and taking out a solar loan, as well as the advantages and disadvantages of both payment options.

Paying Cash for Solar Panels

Paying cash for your solar panels can seem like a scary thought at first. Most solar panel systems cost in the range of $15,000 to $50,000 or more before incentives. This can be an intimidating amount of money to invest all at once.

The good news is that paying cash for your solar panels is often the best option for recouping your investment and seeing quicker returns.

One of the largest reasons to pay cash for your solar panels is the lack of interest costs. Solar loans come with interest rates that can be as high as 5.99% or more. Over time, those interest costs add up.

For instance, if you were to take out a $15,000, 20-year solar loan at 4.99% interest, your total cost would be over $23,700. That’s over $8,700 just in interest costs. Those interest costs negatively affect your return on investment and can lengthen your solar payback period.

Another reason to pay cash is that you can start seeing your savings add up immediately. Without a monthly solar loan payment, every dollar your solar panels cut from your monthly utility bill is another dollar closer to reaching your solar payback period.

Paying cash also helps you avoid the hassle of paperwork and the approval process that comes with solar loans. This might seem like a minor benefit, but it’s one less hurdle to overcome in realizing the benefits of solar energy.

FREE Solar Calculator

Estimate your total savings, payments, and total energy usage with our FREE solar calculator. 

Solar Loans are also Good Options

If paying cash for your solar panels is not feasible or preferable, taking out a solar loan is another great option to pay for your solar panels.

Solar loans allow you to finance part of or the entire cost of your solar panel system, and they have the same basic structure, terms and conditions as other home improvement loans and are based on your credit score.

Solar loans have grown in popularity and availability in recent years, thanks to the strong growth of solar energy. Solar loans are available through numerous institutions, including banks, credit unions, solar panel manufacturers, private lenders, municipalities, and utility companies.

The largest benefit of solar loans is convenience. Instead of paying for your solar panels all at once, you can set up monthly payments that fit within your budget. Plus, the flexibility of solar loans provides opportunities such as $0 down payment and variable loan lengths.

What’s even better is that many times, solar loans can set up monthly payments that are near or below your current energy bill. This means that you don’t have to make major adjustments to your monthly budget to accommodate the solar loan. Instead, you can shift your monthly energy bill payment to your solar loan payments and own your entire solar panel system afterwards instead of continuing to pay endless energy bills forever.

However, the convenience of solar loans comes at a cost. As explained above, the interest costs associated with solar loans can negatively impact your solar payback period.

As the example above showed, a $15,000, 20-year solar loan at 4.99% interest would cost over $23,700. That’s over $8,700 just in interest costs. Those interest costs are an additional expense you have to consider when thinking about the payback period of your solar investment.


Cash vs Solar Loan? How They Compare

Both paying cash for your solar panels and taking out a solar loan are great options. Each has its pros and cons, so here is a breakdown of the advantages and disadvantages of both options.


Solar Loans

Get Your FREE Solar Analysis

Request a FREE solar analysis for your home. We’ll evaluate your roof, sun exposure, electricity usage, tax incentives, and more to help you decide if solar is right for you!