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The Recent Rise of Solar Loans

Mar 22, 2019 - Impact Investing, ESG by CCM Invests

Wanting to go more environmentally friendly with a solar panel system? Forget about cash purchases or solar leases, solar loans are all the buzz right now.  These loans are designed for consumers who lack the capital for a cash purchase, but still want to maximize the financial benefits of a solar installation. 

Similar to other loans, the consumer borrows money from a lender with an agreement to pay the loan over the term with an accrued interest.  In fact, these solar loans most closely resemble a home improvement loan having shorter terms with higher monthly costs.  However, unlike a home improvement loan, solar loans allow the consumer to purchase an asset with financial incentives.  These incentives are mainly in the form of savings, including lower electric bills and up to 30% tax credits or rebates from the federal government.  Over time, the assets from the solar loan will not only help the environment, they will help to cover the solar loan payment, and can contribute even more their owner’s wallet.1

 

Image Source: EnergySage

Given these financial incentives, the solar lending market grew significantly in 2018, emerging as the dominant financing solution for residential systems in the first half of the year.  Loans claimed around 42 percent of the residential market during that period.2 In addition to traditional banks, there are many lenders that offer the ability to finance solar energy systems.  Some solar panel manufacturers offer the financing directly, but innovative lenders, such as Mosaic or Loanpal, are using these loans to separate their brands from more traditional lenders and help promote improvements for a modern home.  And given the dominate growth of the solar loan market, there will likely be more companies entering the market.

 

1 https://www.energysage.com/solar/financing/solar-loans/

2 https://www.greentechmedia.com/articles/read/solar-loans-are-now-the-dominant-financing-product#gs.2lvxae

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