Solar energy is revolutionizing the way people are powering their homes. The pressing need to save the environment from greenhouse gases has started to seep in every household. However, homes and businesses are apprehensive about the cost of financing solar panels. With solar loans, this can be made hassle-free. Read further to know how solar panel financing can help homeowners and businessmen.
What is a solar loan, and what are its types?
A solar loan is a type of financing available to homes and businesses to fund their solar installation. Paying for the entire solar project is a huge burden, and not all can afford it. Solar panel loans enable flexible repayment, which makes solar accessible to all.
Types of loans
- Secured loans for solar panel financing, where the borrower gives some asset as collateral security for the loan taken. The interest rate is lower here.
- Unsecured loans are given based on the borrower’s creditworthiness, without any security. This carries a higher interest rate.
- Solar lease, where you can pay a fixed rent to the solar company for using the solar panels in your home or business.
5 key things to know before taking a solar loan
Assess your requirements
The primary thing before taking a loan is to assess your loan requirements. This will depend on the size of the solar system you plan to set up, your energy consumption, your financial stability, etc. Knowing your requirements will help you understand the amount of loan you can afford, the upfront cost you can commit to, and the extent to which you can self-finance your solar panel setup.
Assess the loan terms and tenure
The next thing is to analyze the terms of the loan and its tenure. Based on your financial position, you may take a short-term or a long-term loan. With a long-term loan, your monthly installments will be lower, and vice versa for short-term loans. Interest payments will generally be higher for long-term loans. A reputed solar company can help you secure loans at favorable interest rates with a minimum down payment.
Examine all the terms and conditions related to the loan. This will help you understand the repayment period, interest duration, the security required, etc.
Learn about the government schemes and subsidies available
To promote renewable energy in the country, our government has introduced various incentives and subsidies. You can apply for the same by following the necessary guidelines. This will also lower the cost of your solar project and hence reduce the amount of loan required.
For systems up to 2 kW, the government offers a subsidy of 60% and 40% for up to 3 kW, under the PM Surya Ghar: Muft Bhijli Yojana. Various state-level incentives are also available, which you should explore before applying for a solar loan.
Compare various financing options
Analyse and choose between secured and unsecured loans. Secured loans can fetch you loans at lower interest rates, but if you do not have a property to pledge, you can choose unsecured loans. Also, consider the other options available for financing.
Homes and businesses may pay a fixed monthly rate for use of the panels. In this case, the ownership of the panels is not with homeowners. Personal loans are another alternative source of financing a solar panel purchase.
Assess your credit score
Your credit score matters when you apply for solar loans. It indicates your financial stability, based on which lenders decide whether to sanction the loan or not. Before applying for a loan, make sure you know what your credit score is, so that you can improve it if it needs attention.
Benefits of solar loans
Reduced upfront cost
Most homeowners and businesses fear the initial investment in solar panels, as it is quite high. But with solar panel loans, the upfront cost of solar panels becomes low and affordable. Financing solar panels through loans motivates more people to switch to solar.
Flexibility
Loans offer flexibility in repayment as it is spread over several years. During this time, you can reap the expected returns from the solar system, which makes it convenient for loan repayment.
Cost savings
Homes and businesses can enjoy long-term cost savings with solar panel loans. Your electricity bill will be significantly lower as your power needs are met through in-house solar panels and not the public grid.
Tax benefits
A tax holiday is available for large-scale solar projects of businesses, which allows 100% tax exemption on the profits of the first ten years. Also, accelerated depreciation of up to 40% is available in the first year, benefiting businesses hugely.
Role of solar companies in choosing a solar loan for your homes and businesses
Professional solar companies play a major role by assisting homes and businesses in securing solar loans at affordable rates. Freyr Energy is one of the key players in the solar industry with more than a decade of experience. Our experts assess your energy needs and decide on the amount of loan you should plan.
With a vision to make solar affordable to everyone, we help homeowners and businessmen secure loans seamlessly. Freyr Energy offers flexible financing options with zero-cost EMI, making solar accessible to all. We also help in securing collateral-free loans with minimum documentation.
Conclusion
Solar panel financing has a great role to play in spearheading the move towards renewable energy sources. More and more homes and businesses will be brought under the solar cover. With solar loans, the country can soon reach its sustainability goals.
Frequently Asked Questions
A solar loan is a means through which homeowners finance their solar panel purchase. It reduces the initial expenditure of homeowners and brings in long-term cost savings.
Various banks and financial institutions offer solar panel financing at different rates and terms. The solar loan rates also depend on the type of loan you buy.
Solar panel loan rates are a bit higher than home improvement loans, but for the latter, you should offer your home as collateral. But, solar loans can also be unsecured.
You can finance your solar panel installation through solar panel loans or solar leases.
Yes, you can get a rooftop solar loan for residential installations. Do approach a reputed solar company to know more about the same.
