The Ultimate Guide to Solar Financing Options (2026)

How Solar Loans Work

Solar loans work like a home improvement loan. The lender covers the full system cost, and you repay via fixed monthly payments over a typical term of 10–25 years (typically 5–20 years when shopping for loans).

Pros of a Solar Loan

With a solar loan, you own the system from day one, making it an asset that boosts your property value. This ownership means you claim all incentives available to you, including any tax benefits, state credits, rebates, or performance-based incentives like SRECs if available in your area. The long-term financial advantage is significant: after your loan is paid off, you'll generate free electricity for the system's 25+ year lifespan. Additionally, you'll trade a volatile utility bill for a stable monthly payment, providing predictability and peace of mind.

Cons of a Solar Loan

The main trade-off is that you're responsible for maintenance after the workmanship warranty period ends. Additionally, securing favorable $0-down terms and low interest rates requires good credit, which may limit your options if your credit score is below 650.

Applying for a Solar Loan: Step-by-Step

When applying for a solar loan, lenders typically check your credit score and income verification, then assess your property and system value along with expected savings. When shopping for loans, focus on comparing interest rates, loan terms, prepayment penalties, and whether credit unions might offer lower rates and more flexible terms. Be sure to ask about no prepayment penalties and early repayment incentives to maximize your flexibility.

Secured vs. Unsecured Loans: Secured loans use the solar system as collateral (often with lower rates), while unsecured loans may have higher rates but don't require collateral.

What a Lease Is

In a solar lease, the solar company installs panels but retains ownership (third-party ownership model). You pay a fixed monthly "rent" for using the solar system. It's like renting vs. owning a home—you enjoy the benefits without building equity.

Note: Review lease terms carefully, as the sales process may differ from loans.

Pros of a Solar Lease

Solar leases typically require $0 down, no maintenance responsibility throughout the lease term (the provider monitors and repairs everything), and offer predictable monthly payments that provide budget certainty.

Cons of a Solar Lease

Leases offer lower lifetime savings compared to loans, and since the leasing company retains ownership and all available incentive benefits, you don't build equity in the system. Additionally, leases can complicate home sales—they typically require a buyout or transfer to the buyer before closing.

What a PPA Is

Similar to a lease, but with a key difference: instead of paying rent on equipment, you pay for the electricity produced at a set kWh rate. A third-party provider owns and operates the system while you pay only for the solar power you use monthly.

Pros of a PPA

PPAs typically start with $0 down, include no maintenance responsibility (the provider handles all maintenance), and tie your payments to production—you only pay for the solar power you use monthly, which can help with budget certainty.

Cons of a PPA

You don't own the system, so the provider keeps all incentives and the long-term financial benefits. Escalator clauses (such as 2.9% annual increases) can erode savings over time, and PPAs generally offer the lowest long-term financial benefit compared to loans and leases.