Millions of homeowners throughout the U.S. would love to have solar panels installed on their roofs. But paying for solar panels in cash just isn’t in the cards for a lot of them.
The average residential solar panel installation project costs more than $23,000 these days. That’s too much money for some people to pay in spite of the many benefits that come along with relying on solar energy.
Solar panel loans might be one promising solution to this problem. Those who can’t afford to pay for solar panels outright can secure solar loans that’ll make the solar panel cost more manageable.
Would taking out one of these solar panel loans be in your best interest? We’re going to discuss the pros and cons of them today so that you’re able to make a smart decision for yourself.
Here are the biggest pros and cons associated with solar panel loans.
The Pros of Solar Panel Loans
In the past, there weren’t always solar panel loans available. If you couldn’t afford to pay for solar panels, you were simply out of luck. You would have to save up money for them if you wanted to invest in solar energy.
But now that solar panel loans are so readily available, it’s made solar panels more accessible. This is one of the pros of solar loans. Take a look at several others below.
Lets You Keep More of Your Money
You might actually have enough money in your banking account right now to pay for solar panels outright. But if spending that money is going to leave you with next to nothing in your account, why do it if you don’t have to?
Taking out solar panel loans will provide people with a chance to hang onto more of their money just in case they need to use it for something else. You should at least think about taking advantage of this opportunity if it’s presented to you.
Studies have shown that more than half of American households wouldn’t be able to cover a $1,000 emergency expense right now. You should do whatever it takes to keep yourself out of this category.
Gives You Immediate Access to Solar Panels
If you want to spend time saving up money for solar panels, you’re welcome to do it. But this isn’t going to be something you can do overnight.
Many homeowners are going to spend well over $20,000 for solar panels nowadays. You might be looking at spending a few years trying to save that much money up depending on how much you make each year.
Taking out a solar panel loan will help you avoid having to do this. Instead of saving money, you can get solar energy now with a loan and throw the money you would be saving at your loan balance in the years to come.
Cuts Costs and Provides Money to Pay Off Solar Panels
You’ve probably heard some people make the argument that solar panels are worth buying because they “practically pay for themselves.” And they’re right!
Once you have solar panels installed on your roof, they’re going to begin generating solar energy for your home. This solar energy will reduce your energy costs each month and put more money into your pocket.
You can then use this money to pay down a solar panel loan. You’ll literally be using some of the money that you’re saving while paying for solar panels, which is the definition of something “paying for itself.”
You should, of course, see to it that you’re going to be saving enough money each month to cover your solar panel expenses. But even if your savings don’t help you make a full loan payment, you’ll find that your solar panels will pay for themselves over time.
Increases the Value of Your Home
Buying solar panels is going to do more than just save you money on your energy costs. It’s also going to help you create more wealth in another way.
So, how’s it going to do it? Well, your new solar panels should send the value of your home skyrocketing. These solar panels will serve as an excellent selling feature one day, especially if they’re still on the newer side.
There aren’t too many home improvement projects that can offer the return on investment that solar panels will. You’ll be pleasantly surprised to see what your house will be worth once your solar panel installation job is finished.
Helps You Build Up Your Credit Score
Any time you take out a large loan for something like solar panels, it’s going to take a slight hit on your credit score. The simple fact that you’re attaching debt to your name might result in your credit score sliding in the wrong direction.
But this isn’t going to last long. As soon as you begin paying a solar panel loan off, you’ll see your credit score soar again. And you might even find that it’ll go higher than it already was when you’re all done paying off a solar loan completely.
Paying off a solar loan will show lenders that you’re a responsible borrower. It’ll take your credit score to the next level and make you glad you decided to pay for solar panels with a loan.
The Cons of Solar Panel Loans
As you can see, taking out solar panel loans is going to make all the sense in the world for so many people. You can benefit from the solar loans that are available in this day and age in a variety of ways.
But there are some potential downsides to taking out solar panel loans that should also be on your radar. You shouldn’t necessarily allow them to dissuade you from applying for a solar panel loan, but you should at least be aware of them.
Check out several cons of solar panel loans below.
Makes It Feel Like You Don’t Own Solar Panels
When you pay cash for solar panels, you’re going to feel like these solar panels are yours. But when you utilize a solar loan to buy them, you might not get this same sense of satisfaction.
Until you pay off a solar panel loan, you might not take as much pride in your new solar panels as you would otherwise. You’re always going to have a debt hanging over your head and reminding you that your solar panels aren’t paid off just yet.
Some people might not mind this too much. But others might wish that they had figured out a better way to go about paying for solar panels.
Adds to Any Existing Debt You Have
A large percentage of Americans already have more than enough debt following them around. From mortgages and student loans to credit card balances and car payments, they have lots of debt to keep them busy.
If you take out one of the solar panel loans out there, you might be adding to your debt and making it even more difficult for you to keep up with it. This is something you’ll need to give thought to before applying for solar loans.
If you’ve worked hard to limit the amount of debt that you have, you might not want to put yourself into debt with a solar loan. And if you already have a ton of debt, you might not want to make your debt problem any worse than it is.
Creates Complications With Selling Your Home
Do you plan on staying in your current home for the foreseeable future? If you do, you may not need to be concerned about making the home-selling process complicated down the line.
But if there is even a small chance that you might sell your home prior to paying off a solar panel loan, that could be reason enough not to take a solar loan out. It could come back to bite you later on if you aren’t careful.
You might have to pay off a solar panel loan before you’re able to sell your home in the future. Or you might have to work out another arrangement with a buyer or even your lender before being allowed to sell a home with financed solar panels on it.
There are obviously ways to get around the complications that solar panel loans can cause when you’re selling a home. But they can make selling a house an even more stressful process than it will already be.
Reduces the Chances of Being Approved for Other Loans
Are you anticipating having to take out any other types of loans in the near future? Maybe you know that you’re going to need to buy a new car soon and want to use a car loan to do it. Or maybe you know that you’re going to need to remodel your kitchen soon and plan to use a personal loan to do it.
Whatever the case, you’re going to be borrowing a nice chunk of change when you take out a solar panel loan. It could reduce the chances of you being able to get approved for any other loans.
As we mentioned earlier, you could actually put yourself in a better spot as far as your credit score is concerned after paying off a solar loan. But until that time comes, you might have to steer clear of trying to apply for too many other types of loans. You may get rejected if you try because of the debt balances that you’ve already agreed to take on.
Limits Your Enthusiasm for Solar Panels
When you first have solar panels installed on your roof, you should be excited about it. You should look forward to beginning to use them to generate solar energy for your home.
But you might discover that your enthusiasm for your new solar panels will be muted when you still have to worry about paying off a solar panel loan. You might feel like you aren’t able to get too excited until this loan is paid off.
If you know that you’re the type of person to do this, paying for solar panels with cash might be a better option for you. You know yourself better than anyone else, so you’ll have to decide if you’d prefer to take that approach over applying for solar panel loans.
Is a Solar Panel Loan Right for You?
Now that you know about all the different pros and cons of solar panel loans, you should be able to make the right decision on how to pay for solar panels. Let these pros and cons rattle around in your head for a little while and then decide what you want to do next.
Some people are going to find that paying for solar panels with cash will be the best option for them, even if it means waiting a little while to get them. Others will love the idea of using solar panel loans to pay for solar panels now so that they can start cutting their energy costs right away.
Look Into Installing Solar Panels Soon
No matter how you decide to pay for solar panels, you should definitely think about installing them soon. They’ll save you money, increase your home’s value, and make your home more energy-efficient in the process.
They might also be even more affordable than what you’re thinking. You might not need to consider taking out solar panel loans after finding out the price you’ll have to pay for them. It’s why you should speak with a trusted solar panel installation company today before weighing your options.
Browse through our other blog articles to get your hands on more financial tips and tricks.