Key takeaways


re you planning a solar project but worried about the upfront cost? Don't let that hold you back! There are several ways to finance your project without having to pay for it outright. In this article, we will explore various solar financing options that won't drain your budget, such as loans, leases, and PPAs. So if you're ready to make the switch to renewables, keep reading to learn everything you need to know about solar financing.

Options for solar financing

Solar Financing Options Infographic
Source: Your Solar Finance Primer: What to Know About the Top Four Solar Financing Options | Aurora Solar

In this part, we're going to take a look at the ways how you can finance solar panels as a homeowner. There are a few different types of financing for solar energy projects, like buying the modules outright, leasing them, getting a PPA, or taking out a loan. We'll go over all the pros and cons of each one so you can decide which one is best for your project.

Upfront payment

If you choose the upfront payment financing for your project, you'll pay the entire cost of the system all at once. This is often a good choice for homeowners who have the money available to pay for the project in a lump sum.

By choosing upfront payment for solar energy financing, householders have the opportunity to fully own their system. This means that they are not bound by any project financing agreements or contracts and can enjoy cost savings without having to worry about making monthly payments.

Paying upfront can not only be convenient, but it can also potentially save you money on your project in the long run. Many companies offer discounts or incentives for customers who pay upfront, particularly for larger projects. This can result in a lower overall cost for your project and significant savings for you. So not only will you have the peace of mind of having your project fully paid for, but you may also end up paying less than if you had chosen a different type of solar project financing.

However, while upfront payment may seem like a perfect solar financing choice, it may not be practical for everyone. This is because it requires a large amount of money upfront, which may not be accessible for those who don't have the necessary resources. If this is the case, it may be more advisable to consider alternative ways of solar project financing, such as loans or leases.

Use your own personal savings calculation to shop and compare top providers

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Leasing is a popular financing alternative to consider. By opting for a lease, a homeowner grants the company the right to install and maintain photovoltaic modules on their property. They will then pay a monthly fee in exchange for the use of the project and the electricity the panels generate. The company takes on the responsibility of ensuring the array is in good working condition, including any necessary repairs.

This type of solar financing has many advantages, one of the biggest being that you don't need to pay a large sum of money for the project upfront. Most leases don't even require a down payment, so it's a good financing opportunity for people who do not have the funds to finance the project outright. Plus, a lot of leasing companies offer project financing plans that are easy to manage, and some even let you switch to a purchase plan later on.

Another benefit of leasing is that it usually includes monitoring and maintenance. That means the company takes care of making sure the modules are working properly and will fix any issues that come up. It's a good way to have peace of mind and not have to worry about taking care of a system yourself.

But there are also downsides to leasing. One big drawback is that you won't own the system, which means you won't get all the benefits of generating your own electricity. Additionally, the monthly lease payments might be more expensive than buying the panels outright. It's important to weigh the pros and cons of this type of solar project financing before making a decision.


PPA contract is another way of solar energy financing. With a PPA, the project is owned and maintained by a third party, typically a project developer or financing company. The customer, in turn, agrees to purchase the electricity generated by the modules at a fixed rate for a certain amount of time, usually 20-25 years.

Financing your project through solar PPA shares some similarities with lease financing. The main difference between these two types of solar financing is that in a PPA, the property owner pays for the electricity generated by the system, while in a lease, the property owner pays a fee to use the system.

PPAs are a decent financing alternative because they allow you to access renewable electricity without having to pay for the project upfront. This is especially helpful if you don't have the funds or credit to cover the costs of the project.

Another benefit of a PPA is that you get to save money on maintaining and fixing your PV installation. The company that provides the PPA takes care of it, which can save you money in the long run. In addition, the PPA provider is responsible for monitoring the performance of your solar panels to make sure they are working at their best and generating the most electricity possible.

One downside of a PPA is that solar might end up being more expensive in the long run. While it might cost less upfront to get a PPA than to buy and set up the modules on your own, the long-term cost could be higher. Additionally, PPAs often imply a cost escalator - a clause in the contract that allows the price of electricity to increase over time. This means that the cost of electricity the project generates will not be fixed but will increase with inflation or other market factors.

Another disadvantage of this solar financing choice is that you don't own the project. The company owns and takes care of the modules, so you don't have any control over the maintenance or repair. This can be a problem if something goes wrong with the panels because you might not be able to fix it right away. Plus, you can't sell the modules or take them with you if you move.


One more way of solar project financing with no need to pay the whole sum upfront is loans. These loans can help cover the upfront costs of the project, as well as other related expenses such as permitting and inspections. With a loan, the borrower can make monthly payments over a set period of time, making it more affordable and manageable. The loans can be obtained through banks, credit unions, or specialty financing companies.

Solar loans can be a really good deal with low interest rates and flexible repayment plans. You can even find loans with interest rates as low as 4% or 5%. Plus, some loans have deferred payments, which means you don't have to start paying for your project until your modules are installed and producing electricity.

Nevertheless, this type of financing for solar projects has several disadvantages. One is that the loans usually have higher interest rates than regular loans, which can make the panels more expensive in the end. Plus, loans might require a down payment or only be available to people with a certain credit score, which could be a problem for some people.

Another disadvantage is the potential for repayment issues. If a homeowner experiences difficulties with finance, they may have trouble paying the monthly installments, which could result in late fees or even default. Therefore, this financing type can be a significant risk for homeowners, especially those who are on a fixed income or have unstable employment.

Use your own personal savings calculation to shop and compare top providers

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Considerations when choosing how to finance your project

In this section, we'll go over the different things you should think about when deciding how to finance your project. By considering these factors, you can make a smart decision and make sure your project is financially viable and worth it in the long run.

  • Cost: One of the main considerations when choosing the type of financing for solar systems is the cost. Different financing plans have different costs associated with them, such as interest rates, fees, and terms. It's important to compare the costs of different plans to determine which one is the most affordable for you to finance your project.
  • Credit score: Another consideration is your credit score. Some financing plans, such as loans, require good credit to qualify. If you have a lower credit score, you may need to explore alternative financing for your project that doesn’t require a credit check.
  • Repayment terms: Different types of solar power project financing also have different repayment terms, so you'll need to consider how long you'll be paying back the financing. Some alternatives may have shorter terms, which may result in higher monthly payments for the project, while others may have longer terms, which may result in lower monthly payments.
  • Tax credits and incentives: Many state and local governments offer tax credits and incentives for residential solar projects, which can significantly reduce the overall cost of the project. Be sure to research what incentives are available in your area and consider how they might affect your opportunities.
  • Your financial situation: Finally, you'll need to consider your financial standing when choosing how to finance your project. This includes your income, debt, and overall stability. Make sure to choose a funding type that works for your budget and solar financial goals.

Still have questions? Watch this video about Solar Financing (Solar Loan)

Final thoughts

When deciding on financing for solar project, it's important for homeowners to weigh the pros and cons of each option and think about what works best for their situation. It's a good idea to discuss ways of financing solar power with a solar expert to see what would be the best fit for your project. Ultimately, the decision on solar financing will depend on your specific project and goals. With a little bit of research and consideration, you can make a well-informed choice about solar financing that fits your budget and needs.

Key takeaways

Empowering Your Solar Financing Journey: A Quick Overview

  • Diverse Options: Explore various financing avenues such as loans, leases, PPAs, and upfront payments, tailored to different budget constraints and preferences.
  • Upfront Payment Benefits: Opting for upfront payment ensures full ownership without ongoing monthly obligations. Enjoy potential long-term savings, discounts, and incentives, particularly suitable for those with immediate financial resources.
  • Convenient Leasing: Leasing offers a viable path with no upfront payments and maintenance benefits. However, weigh the trade-off – lack of ownership and potential long-term costs compared to outright purchase expenses.
  • Understanding PPAs: Power Purchase Agreements (PPAs) provide access to renewable energy without upfront costs, with savings on maintenance. Be mindful of potential long-term expenses and the impact on property resale without ownership.
  • Loan Flexibility: Loans alleviate upfront financial strain with manageable monthly payments. Explore competitive interest rates and repayment plans but consider potential higher overall costs and credit score requirements.
  • Key Considerations: Evaluate factors like overall cost, credit score requirements, repayment terms, available incentives, and financial stability when selecting the financing option aligning with your solar goals and budget.
  • Seek Expert Advice: Consulting with a solar expert offers tailored insights for an informed decision, ensuring a financially viable and rewarding solar journey aligned with your specific situation.
Jun 19, 2023
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