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Solar Loans: How to Finance Your Solar Panel System

Annie MillerberndMarch 3, 2020

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Solar loans fund solar panels and installation. You can use an unsecured personal loan, home equity financing or cash-out refinancing.

Summary of Solar Loans: How to Finance Your Solar Panel System

LenderBest ForEst. APRMin. Credit ScoreLearn More
Lightstream

LightStream

on LightStream's website

Solar loans

4.99 - 16.79%

660

on LightStream's website

Upgrade

Upgrade

on Upgrade's website

Solar loans

7.99 - 35.97%

600

on Upgrade's website

SoFi

SoFi

on SoFi's website

Solar loans

5.99 - 18.64%

680

on SoFi's website

Lending Club

LendingClub

See my rates

on NerdWallet's secure website

Solar loans

6.95 - 35.89%

600

See my rates

on NerdWallet's secure website

Our picks for

Solar loans

These lenders offer low-rate loans, and all have a maximum loan limit high enough for most solar panel additions.

Lightstream

on LightStream's website

LightStream

Lightstream

Min. Credit Score

660

Est. APR

4.99 - 16.79%

Loan Amount

$5,000 - $100,000

on LightStream's website


Min. Credit Score

660

Key facts

LightStream offers low-rate personal loans with repayment terms up to seven years.

Pros

  • No fees.

  • Co-sign option.

  • Low starting rates.

Cons

  • Does not offer pre-qualification on its website.

  • Requires several years of credit history.

Qualifications

  • Minimum credit score of 660.

  • No minimum income specified.

  • Maximum debt-to-income ratio varies depending on loan purpose.

Available Term Lengths

2 to 7 years

Fees

  • Origination fee: None.

  • Late fee: None.

Disclaimer

Your loan terms are not guaranteed and may vary based on loan purpose, length of loan, loan amount, credit history and payment method (AutoPay or Invoice). Rate quote includes AutoPay discount. AutoPay discount is only available when selected prior to loan funding. To obtain a loan, you must complete an application on LightStream.com, which may affect your credit score. You may be required to verify income, identity and other stated application information. Payment example: Monthly payments for a $5,000 loan at 12.8% APR with a term of 3 years would result in 36 monthly payments of $168. Some additional conditions and limitations apply. Advertised rates and terms are subject to change without notice. SunTrust now Truist is an Equal Housing Lender. © 2020 Truist Financial Corporation. SunTrust®, Truist, LightStream®, the LightStream logo, and the SunTrust logo are service marks of Truist Financial Corporation. All rights reserved. All other trademarks are the property of their respective owners. Lending services provided by SunTrust now Truist Bank.

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Upgrade

on Upgrade's website

Upgrade

Upgrade

Min. Credit Score

600

Est. APR

7.99 - 35.97%

Loan Amount

$1,000 - $50,000

on Upgrade's website


Min. Credit Score

600

Key facts

Upgrade offers personal loans plus credit-building tools; you'll need strong cash flow to qualify.

Pros

  • Credit health tools.

  • Hardship plans.

  • Directly pays creditors for debt consolidation loans used to pay off credit cards.

Cons

  • Origination and late fees.

Qualifications

  • Minimum credit score: 600.

  • Minimum annual income: None, but most applicants earn more than $30,000.

  • Minimum monthly free cash flow: $800.

  • Maximum debt-to-income ratio: 60%.

  • Unavailable to borrowers in: Iowa, Vermont or West Virginia.

Available Term Lengths

3 to 5 years

Fees

  • Origination fee: 1.5% - 6%.

Disclaimer

Personal loans made through Upgrade feature APRs of 7.99%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by Upgrade's lending partners. Information on Upgrade's lending partners can be found at https://www.upgrade.com/lending-partners/.

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SoFi

on SoFi's website

SoFi

Min. Credit Score

680

Est. APR

5.99 - 18.64%

Loan Amount

$5,000 - $100,000

on SoFi's website


Min. Credit Score

680

Key facts

SoFi offers good-credit borrowers flexible payment options and unemployment protection that lets you defer your loan payments if you lose your job.

Pros

  • Low fixed and variable rates.

  • Flexible payment options.

  • Offers member perks.

Cons

  • Does not offer direct payment to creditors with debt consolidation loans.

  • Does not offer refinance options.

Qualifications

  • Minimum credit score: 680, but typically 700 or higher.

  • Minimum annual income: None; borrowers' average is over $100,000.

Available Term Lengths

2 to 7 years

Fees

  • Origination fee: None.

  • Late fee: None.

Disclaimer

Fixed rates from 5.99% APR to 18.64% APR (with AutoPay). SoFi rate ranges are current as of March 27, 2020 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

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Lending Club
See my rates

on NerdWallet's secure website

LendingClub

Lending Club

Min. Credit Score

600

Est. APR

6.95 - 35.89%

Loan Amount

$1,000 - $40,000

See my rates

on NerdWallet's secure website


Min. Credit Score

600

Key facts

LendingClub offers personal loans for borrowers with fair credit. Joint or single applications are accepted.

Pros

  • Offers direct payment to creditors with debt consolidation loans.

  • Joint loan option.

  • Soft credit check with pre-qualification.

Cons

  • Charges origination fee and late fees.

  • Does not offer mobile app to manage your loan.

Qualifications

  • Minimum credit score of 600. LendingClub uses FICO 8 credit scoring model.

  • Minimum credit history of three years.

  • Debt-to-income ratio of less than 40% for single applications, 35% combined for joint applicants.

Available Term Lengths

3 to 5 years

Fees

  • Origination fee: 1% - 6%.

  • Late fee: Greater of $15 or 5% of payment after 15-day grace period.

Disclaimer

*All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage and history. The APR ranges from 6.95% to 35.89%. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long-term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: 595 Market St suite 200 San Francisco Ca 94105. **Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between Jan. 1, 2018, and July 20, 2018. The time it will take to fund your loan may vary.

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» MORE: Best home improvement loans

What to look for in an unsecured solar loan

Unsecured loans with low rates and short repayment terms can help you pay off your solar panel system quickly. In contrast, you may be making smaller payments on a home equity line of credit for 10 to 20 years.

Annual percentage rate: The APR is the total cost of your loan, including interest and fees. Rates on personal loans range from about 6% to 36%, with the lowest rates reserved for good- and excellent-credit borrowers with little debt. When comparing loans, be sure to compare APRs, rather than just interest rates, to make a sound comparison.

» MORE: Calculate your unsecured solar loan payments

Fees: Some lenders charge an origination fee, which can be 1% to 6% of the cost of the loan, and is usually taken off the amount you’re given. If you get a $10,000 loan with a 3% origination fee, the lender will keep $300 of the loan.

Terms: The amount of time you have to repay your loan helps to determine your monthly payments. With longer repayment terms, you have lower payments but you’ll pay more total interest.

Pre-qualify for a solar loan

Take the steps to pre-qualify for a personal loan on NerdWallet to see what rates and terms are available to you. This process typically involves a soft credit check, which doesn't impact your credit score.

» GET STARTED: Pre-qualify with multiple online lenders on NerdWallet

Solar panel tax benefits

For people who purchase and install a solar panel system, the federal government provides a 26% tax credit for solar panel installation in 2020. That credit will lower to 22% in 2021 and there isn’t a tax credit for residential solar systems scheduled after that.

For example, you could receive a $5,200 credit on a $20,000 system with the federal tax credit alone.

You can take advantage of tax benefits as long as you own your system, no matter how you fund it.

The federal tax credit is nonrefundable, meaning if you don’t owe taxes the year you get your panels installed — or owe less than the 26% credit will get you — you won’t get those savings.

Some states also offer tax benefits and other incentives for solar installation. You can look up your state’s offerings in the Database of State Incentives for Renewables and Efficiency.

Other types of solar loans

Home equity loan

If you already know how much your solar panels will cost, you can apply for a home equity loan. Since borrowers take on more risk by putting the home up as collateral with a home equity loan, it has lower rates and longer repayment terms than unsecured loans.

Home equity line of credit

A HELOC is another low-rate option that is secured by your home. It’s more flexible than a home equity loan because you can draw on funds as you need them for the project, and you often have the option to only pay interest during the initial portion of the loan.

» MORE: Best home equity lines of credit

If you’re considering a home-equity option, learn the pros and cons of each before you choose.

Cash-out refinance

A cash-out refinance can get you a new mortgage at a lower rate that includes the cost of solar panels and installation. It’s a good option if current mortgage rates are lower than what you’re paying and if you can keep closing costs low.

Closing costs on a cash-out refinance can be 2% to 5% of the mortgage’s cost. That means, on the high end, a $250,000 mortgage can come with $12,500 in closing costs — which is almost the same cost as some solar panels.

Leasing or getting a power purchase agreement

If you don’t want to make a large upfront payment or are ineligible for federal and state tax credits, consider a power purchase agreement or leasing solar panels.

In both cases, you pay little or no upfront costs to essentially rent the solar panels. The owner of the panels collects rent from you and receives any available tax incentives from the government. You’re also not responsible for maintenance.

The U.S. Department of Energy has more details about the difference between a lease and power purchase agreement.

Things to consider with solar panels

Calculate your sun exposure, costs and savings. In some parts of the country, solar panels will save more money and add more value to your home than in others. For example, someone in Seattle might not get the same value from solar panels as someone in Phoenix because of the disparity in sunshine.

To estimate your savings, you first need to know how many kilowatt-hours you use and how much you’re paying for them. The average household pays about 13 cents per kilowatt-hour for 914 kilowatt-hours each month, according to 2019 data from the U.S. Energy Information Administration.

Then, figure out what size system you’ll need. You can use the Solar-Estimate calculator to see how many panels your home would need and how much energy they would generate.

» MORE: Will solar panels save you money?

Expect to make your money back over years, not months. The Center for Sustainable Energy estimates it takes six to nine years to recoup the cost of adding solar panels to your home. So your utility bill savings won’t immediately put more money in your pocket.

How long it’ll take you to make the cost of the panels back depends on the system you choose, which government funding programs are available, where you live and how you decide to pay for it.

Last updated on March 3, 2020

Methodology

NerdWallet's ratings for personal loans award points to lenders that offer consumer-friendly features, including soft credit checks, no fees, transparency of loan rates and terms, flexible payment options, accessible customer service, reporting of payments to credit bureaus and financial education. We also consider the number of complaints filed with agencies like the Consumer Financial Protection Bureau. This methodology applies only to lenders that cap interest rates at 36%, the maximum rate financial experts and consumer advocates agree is the acceptable limit for a loan to be affordable. NerdWallet does not receive compensation of any sort for our reviews.

To recap our selections...

NerdWallet's Solar Loans: How to Finance Your Solar Panel System