Get the funds you need to finance a new solar system for your home.
Solar power systems harness clean energy from the sun to power your home. Installing solar panels is a wonderful way to help the environment and save money on your power bills at the same time, but solar systems don’t come cheap. This guide will take you through the solar panel finance options available to help you get the renewable energy you want at home.
What’s the best way to finance a solar panel?
There are several options available to help you finance solar panels, but the best one for you will depend on your personal financial situation. You can choose from the following finance arrangements:
- Green personal loans. A green personal loan is a personal loan specifically designed to fund the purchase of specific energy-efficient products, such as electric or hybrid cars, energy-efficient air conditioning or solar panels. These loans can be secured or unsecured and have terms ranging from six months up to seven years. They also tend to feature flexible borrowing limits based on the items you want to purchase, and many lenders allow you to make early repayments without penalty. Green personal loans are a good choice for most borrowers who have a good credit score.
- Interest-free solar loans. Some lenders, such as Brighte, specialise in offering interest-free loans to cover the cost of buying home energy systems or completing home improvements. However, remember that there’s no such thing as free finance, so interest-free loans tend to come with higher fees than other options. Many finance companies that offer interest-free solar finance also receive a fee, usually between 15% and 25% of the purchase price, from the solar installer – which means you’ll typically have to pay a higher retail price to get the system installed. However, if you’ve got poor credit and can afford to make the larger repayments needed to pay off your debt over a shorter period, an interest-free loan might be a good choice.
- Mortgage redraw. Another common way to finance solar panels is to add them to your home loan. By using your loan’s redraw facility, you can access substantially lower interest rates than you would get through other options and also avoid a range of additional fees that come with setting up a new loan. However, if you’re the type of borrower who only ever makes the minimum mortgage repayment, the total cost of your solar system when paid off over the length of your home loan term could almost double. As a result, this option is best suited to borrowers who are committed to paying off their home loan as quickly as possible.
- Solar lease agreements. Under this arrangement, the leasing company retains ownership of the solar system until you have paid it off in full under the terms of the lease. This is a useful option for anyone who doesn’t want to buy a system upfront, and you’ll rely on fixed monthly repayments (including interest) to pay off your debt. Solar leasing means you don’t have to worry about the maintenance and upkeep of the system, but make sure you calculate the total cost of repayments before deciding whether this option is right for you.
- Power purchase agreements. A solar power purchase agreement allows you to get a solar system installed for no upfront cost, but you then have to agree to buy electricity from the solar company for a fixed term, such as 15 or 20 years. Ownership of the system stays with the solar company. However, under this type of agreement you are contractually obligated to buy a specified amount of electricity from the retailer, even if you don’t need it, so power purchase agreements are best suited to large solar systems in commercial premises.
Loans you can use to fund solar panels
How much do solar panels cost?
The cost of installing a solar power system is influenced by a few main factors:
- The size of the system
- The solar power rebate that applies
- The quality of the solar panels you choose
- Installation costs (these can vary based on any constraints or restrictions at your property)
A reasonably-sized solar system of 5kW or more could set you back over $6,000. To find out how much going solar could cost you, head to Solar Calculator and calculate the cost of your system.
How do solar power rebates work?
The Australian Government offers a range of solar rebates, subsidies and grants to help make it more affordable to install solar power. For home owners, the main rebates you need to know about are:
- Home solar power rebates. The Solar Credits subsidy could help you save thousands off the cost of a new solar system. Under the scheme, every megawatt hour of qualifying small-scale renewable energy generated by the system is eligible for small-scale technology certificates, which can then be traded for cash. The value of a small-scale technology certificate (STC) varies depending on market conditions.
- Off-grid solar power rebates. If you live in a remote location and you want to install an off-grid solar power system, you’re eligible to receive the Solar Credits Subsidy. STCs are provided when you install an eligible system and can then be redeemed for cash.
How can I compare my solar panel finance options?
Make sure to consider the following factors when comparing your finance options:
- Fees. Remember to check the fine print for upfront fees, such as establishment and application fees, as well as any ongoing charges that apply. These can have a big impact on the total cost of finance.
- Interest. Compare the interest rates available from different finance providers to find the lowest rate available. Remember to make sure you compare variable rates with other variable rates and fixed rates with other fixed rates.
- Repayment schedule and amount. How much will the regular repayment amount be and how often do you need to make repayments? What will the total cost be over the life of the loan or lease?
- Repayment flexibility. If you come into some extra cash, will you be allowed to make additional repayments without incurring any fees? Can you pay the loan off early without penalty?
- Loan amount. Check the minimum and maximum limits that apply to be sure that you can borrow as little, or as much, as you need.
- Security. Will you need to offer an asset as security for the loan, or is the finance offered on an unsecured basis?
Quick guide to choosing a solar panel
There are three types of solar system available:
- Grid-connected solar systems. Grid-connected systems allow you to avoid energy storage costs by letting you feed the unused energy from your home solar system directly into the power grid. You will then receive a feed-in tariff from your electricity retailer. This also means that you have the flexibility to access traditional power from the grid whenever you need.
- Off-grid solar systems. Ideal in remote areas where there are only limited (or even no) utilities available, off-grid systems mean you can completely generate your own power and don’t have to rely on any outside utility provider. However, you will need to cover the extra cost of batteries and/or other energy storage devices, and as storage space is limited, you will often waste unused energy.
- Hybrid solar systems. These systems allow you to store the excess energy you create yourself, rather than feeding it back into the power grid. However, they also allow you to access power from the grid in periods of high energy use or when there is limited sunlight available.
To find the best system for you, it’s important to consider a range of factors. These will include where you live, the size of your home, your energy requirements, the tilt of your roof and even the shade around your property.
Once you know the type of system you want, it’s essential to compare all your options to find the best deal.
Am I eligible for solar finance?
To qualify for solar panel finance you will need to be 18 years or older and an Australian resident. After that, eligibility criteria differ depending on the type of financing you choose.
For example, green personal loans are typically only available to borrowers with good credit who want to use the funds to buy an energy-efficient solar system. However, some interest-free finance providers specialise in offering loans to people with bad credit, so it’s essential that you familiarise yourself with all requirements before you apply.