Adopting solar energy reduces your electricity bills and contributes to environmental conservation. However, most people find it challenging to pay the upfront cost of acquiring a solar panel system that meets their consumption needs.
Although the cost of solar panels is decreasing, components such are batteries are still expensive. Homeowners also have to spend additional money on solar panel installation.
Fortunately, there are several alternatives to cash if you want to install solar panels in your home. Here are some common solar finance options that may be available to you.
Cash is the best way to obtain a solar energy system. If you don’t have any pending debts and have money to spare, consider investing in solar energy. This guarantees you a high return on investment within five years after installation. How?
You’ll no longer depend on your electricity supply company once you install solar panels. You can use the money you’d have otherwise used to settle utility bills on other home improvement projects. You can also deposit it into your savings account.
Additionally, solar systems can be a source of additional income. If your off-grid system produces surplus electricity, you can sell it to the main supplier at a fee.
Green loans are low-interest financing options offered by institutions focused on community support and environmental conservation. However, there’s a condition – you must prove that you’ll use the loan for solar or other energy-efficient solutions. The repayment period ranges between one and seven years.
Brighte is a leading green loan provider in Australia. The company offers credits if you use the funds on solar panels and other related equipment.
Brighte evaluates your income, credit history, and credit score when you apply. You must provide your physical address, phone number, proof of income, employment status, properties, etc. you can borrow between $1,000 to $30,000 at a 5.90% interest rate. The repayment period ranges between three to seven years.
Add to Your Home Mortgage
Currently, most mortgage providers charge interests below 5% yearly. Given that solar energy systems have a high return on investment, it’s wise to collateralise your home to finance a new solar system. The major shortcoming of mortgaging is that most people tend to pay the minimum repayment.
The longer you take to settle your mortgage, the costlier your solar system becomes. This is because interest compounds over time.
Before adding a solar loan to your mortgage, compare the total costs of an instant solar loan to the total cost of your mortgage. Ensure that application and variation fees don’t significantly impact the total amount.
Adding loans to your mortgage is ideal for homeowners who can pay amounts larger than the bare minimum to settle their mortgage. The money you save by reducing your reliance on mains electricity can help you repay your mortgage faster.
Solar Leasing or Pay-as-you-Go Solar
The company installs a solar energy system at a low (or zero) upfront cost. You then sign a lease contract that requires you to pay monthly instalments lower than your typical electrical bills.
It’s worth noting that the leasing company owns the solar system until you complete the payment. The only advantage of this approach is that it isn’t easy to remove an installed solar energy system as it is to dispossess a leased car. If you decide to sell your house, you must complete the payment since you can’t transfer the lease contract to the buyer.
While monthly pay-as-you-go instalments are lower than monthly electricity bills, they factor in interest rates. Upon calculation, you’ll discover that the total amount you pay over the lease is higher than buying in cash. For this reason, it’s better to go for green loans if you’re eligible.
If you can’t access green loans or add to your mortgage, consider applying for a personal loan. This finance option works for people who want to settle their loans quickly, notwithstanding the high-interest rates.
Some financial institutions will offer friendly interest rates if you own a home or prove that you’re investing in an eco-friendly, renewable energy source like solar.
The most remarkable merit of personal loans is getting the money upon approval. Having cash in hand increases your bargaining power. Also, you can sell the house without any issues since it’s not collateral.
Personal loans are ideal for individuals with a reliable flow of income and a good credit score. The instant money gives you an upper hand when purchasing your solar panels and can be useful in other home improvement projects.
On the downside, most banks don’t offer competitive interest rates on personal loans. As a result, your repayment rate will be similar to a family going on a vacation.
Power Purchase Agreements
Like leasing, power purchase agreements begin with a free installation from the solar company. Then, you’ll have to pay for the electricity the system generates, albeit at a more affordable rate. For instance, if the electricity company charges 25 cents per unit, the solar company could charge 16.50 cents per unit.
The problem with such agreements is that you must purchase a set minimum amount of electricity, regardless of whether you need it. People who barely stay indoors or have energy-efficient appliances could pay more than they consume.
Power purchase agreements are ideal if you use most of your electricity during the day. They’re also valuable to companies that want to reduce their carbon footprint but don’t have the resources to purchase a new solar system in cash.
Energy Ease is an Australian firm that funds local businesses looking to adopt solar and other energy-saving projects. The institution offers loans ranging between $3,000 and $5 million, with a repayment period of 10 years.
Whether a sole homeowner or a business person, adopting solar energy is a worthwhile and money-saving investment. It also makes the world better for upcoming generations by reducing greenhouse emissions.
There’s no denying that cash is the best option. However, if you’re cash-strapped, you can explore the alternatives listed in this article. Remember to compare different options and their interest rates to find the one that suits you best!