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The world is going solar, and many businesses, as well as homeowners, have made this decision as well. Apart from the environmental concerns from other forms of non-renewable energy, solar energy offers numerous financial benefits. It is one of the cheapest ways to use energy, saving businesses and households thousands of dollars in energy bills.
With solar energy, you will have reduced electricity bills, diverse applications, low maintenance costs, technology development, and clean energy, among others. After deciding to go solar, the next step is to pay for it.
Assume, just like the majority of Americans, that you do not have the cash to purchase solar energy and its equipment upfront.
What do you do?
It’s imperative to learn that there are plenty of solar financing options that citizens can choose from. The only thing is to figure out which solar power financing option will work best for you. Below are some of the choices you can opt for.
This option is just like getting a small business loan for a venture that is sure to do well. This is due to the fact that solar panels are guaranteed to provide a particular amount of energy for over 25 years. Therefore, installing solar panels implies saving money for every kilowatt-hour that you are not purchase electricity from a utility company.
Heloc is a secured solar loan that capitalizes on your home equity, keeping the rates of interest loans low. There are many secured solar loans that you can opt for.
However, with a good credit score and equity in your home, HELOC is the best option as you can get a rate of 5% or lower. This implies reduced monthly payments and consequently more savings in the long run.
There is also the FHA, which offers the PowerSaver Second Mortgage loan. This loan provides over $25,000 in financing for your solar project. Although it is subject to other requirements, it can also result in rates close to 5%. Another typical solar loan is the Property-Assessed Clean Energy, PACE, which is a property tax lien that is against the home used to pay for solar. Other numerous companies are offering secured solar loans but with rates of 7% or higher.
One main benefit of a secured solar loan is the fact that you will receive complete ownership as you pay. This implies that electricity savings will help in offsetting some of the loan payment and other state-offered incentives.
With this loan, you can also take the federal 30% solar tax based that is granted based on the entire system cost after a few payments. This means that you will save thousands in just a year. Another advantage is the fact that the interest paid on this type of solar loan is deductible.
Including a security interest against your home can make it hard to sell. It is evident that solar panels add the value to your home, but this is only when they have been paid for. Some mortgage companies do not allow buyers to buy homes that have PACE security interests against them. PACE is therefore ideal for people who plan to stay in their homes for long. Another disadvantage of secured solar loans is that they take patience and time to go through. There is a lot of paperwork and procedures involved.
An unsecured solar loan is just like a secured solar loan only that it is not backed by any collateral, meaning the rates are higher. The terms are also lower meaning that there will be more considerable monthly costs.
However, unsecured solar loans have numerous advantages. One is that they are easy to get, and you do not have to sign collateral to put panels in your home. You are only required to have good credit. Also, many large companies, such as Vivint and SolarCity, are now giving loans to their clients. This is a benefit to homeowners as solar companies will usually package other benefits with the loan.
A good example is SolarCity, which adds system monitoring and an extended warranty together with the systems being paid for by the loan. On the other hand, with an unsecured solar investment, the interest rates will be higher, ranging from 5-10% based on the length of the term and amount. The interest rate paid on this loan is also not tax deductible.
Power Purchase Agreements, PPAs, and solar leases are options for homeowners to get solar panels for free but making monthly payments. This means that the PPA and leases will save homeowners 10 to 30% on electric bills immediately. PPAs are commonly referred to as third-party solar because the solar company becomes the second utility provider. Solar electricity will also be sold at a lower rate compared to non-renewable energy that you were buying previously.
Leasing is just like renting the solar panels for an agreed monthly payment and then get all electricity produced. Leases frequently come with energy production guarantees ensuring you receive what you paid for. Third-party solar means that the installation company will own the panels and will conduct all maintenance on your behalf.
This also eliminates risks in case the system fails, which is highly unlikely. It is also an easy way for busy homeowners as you’ll sign an agreement and the company will do the rest of the work.
On the downside, you will be giving the ownership benefits. The installation company will receive the vast tax credit as well as the SREC payments. Also, the annual cost will increase at a rate of 2.9% annually. This implies that you will be paying more as time goes.
A personal loan offers a simple solution as you can take the 30% federal solar tax credit. You will then pay off that much of the loan after a few payments. This is only when you will get a reasonable interest rate. This means that if the interest rate is higher than 8%, leases and PPAs are better off. The personal loan is easy to get with a good credit score. The main downside of an unsecured personal loan is getting a loan for a 15-year term at a reasonable interest rate.
For more information on Solar Power Financing Options, contact Small Energy Bill today for a free consultation and quote.
