Solar systems can be very expensive. It is easy for them to cost in the tens of thousands of dollars. While they are good investments that pay back over the long run, it can be difficult to come up with the money to pay for them up front. Some people will use home improvement loans to purchase their solar panels. However, traditional home equity loans extend the life of your mortgage, which many people do not want to do. Fortunately, there are loans specifically for solar systems.
There are three main types of solar lending programs. They include the solar loan, solar lease, and power purchase agreement. All three of them let you get solar upfront and pay overtime. However, each way to purchase has pros and cons. NJ Solar can help you understand which one is right for you.
Solar loans are the most similar to traditional loans. The homeowner owns the solar system, which is secured by a lien until the homeowner repays the loan. The homeowner can get a loan from a traditional lender. Many solar providers also offer loans for their systems. With solar loans, the homeowner can take advantage of all state and federal tax credits and SRECs. However, not all homeowners will qualify for loans. Moreover, the homeowner is then responsible for all maintenance costs. This is generally the most affordable option.
Solar leases let homeowners get solar without having to purchase it. This usually has lower upfront costs than solar loans, but the homeowner does not own the solar system. For the lease, you may need to make a down payment before it is installed. These lease payments usually increase over time. The benefit is that there is little upfront cost for the homeowner. However, the homeowner may not be able to take advantage of tax incentives or SRECs. In addition, your lease agreement may restrict future activities.
Power Purchase Agreements (PPAs) are similar to leases. Like with a lease, the solar developer pays for, installs, and maintains the solar system. The property owner does not purchase the solar system, but instead pays for the energy that it generates. They enter into a long-term contract with the developer to arrange for the per kilowatt-hour charge for the energy. The risk is that the PPA cost could eventually be higher than the local utility rate. In addition, the developer retains the tax incentives and the SRECs.