Cosmo Solaris


The Ultimate Guide To Solar Panel Financing

The Ultimate Guide to Solar Panel Financing

This is an era of green and renewable energy. In recent years, the global focus on renewable energy has increased as homeowners and businesses are looking for clean alternatives to fossil fuels. Among all the sources of renewable energy, solar power is accepted as a key source of sustainable energy. This resulted in outstanding growth in the solar industry. However, going solar is not that easy, as there is a big hurdle in the form of a very high upfront cost, which makes it unaffordable for some individuals and businesses to adopt the alternate energy source. This blog is going to highlight various solar panel financing options that are available for solar energy systems, making the solar project easy to obtain and more affordable for people who want to switch.

There is a very high initial investment for the installation of the solar energy system. The initial investment screens out many potential consumers from making the switch to renewable energy. The cost of materials, inverters, and installation makes it essential to explore different financing options so that solar energy is accessible to a wider range of consumers.


Solar Loans

A solar loan acts as a financial bridge, that enables individuals and businesses to overcome the challenge of the upfront cost of solar installations. One of the key advantages of the solar loan is its friendly terms compared to traditional loans.

The solar loans are unsecured loans, and there is no lien on the property. The loan is issued against the PV system itself. The solar loans have a wide range of loan terms, from 5 years to 25 years, with an APR ranging from 5% to 11%, depending on the borrower’s pocket. The loan term ranges from 5 years to 25 years. These solar loans offer different APRs. The lower is the APR, higher will be the dealer ship fees, and vice versa. We can say that lower is the APR, higher will be the loan amount.

There are two cases: if you want lower monthly payments, you should go for a lower APR and utilize the entire loan term. But if you are planning to repay the loan early, you should go for the same as cash loan option, which has a higher APR but whose loan amount is the same as cash.

Most of the loan options come with a grace period of 3 to 6 months. Which means your monthly payments will start after that. These loans don’t have any upfront costs. Beside all these advantages the only disadvantage is that the overall out of pocket cost of installing the solar increases significantly. This results in a longer payback period.

Power Purchase Agreements (PPA)

A PPA or Power Purchase Agreements, is an arrangement in which the consumer enjoys a solar energy system without owning it. A PPA is a solar contract between the solar provider and the consumer that agrees to purchase the electricity produced by the solar energy system at a predetermined rate. The contract usually includes the duration of the agreement, the electricity price that both parties agreed upon, and the terms of payment. We can say that it is a complete document defining the rights and the duties of both parties. The duration of the PPA ranges from 7 to several years, providing long-term sustainability to both parties. Sometimes PPA offers a variable pricing structure that includes any adjustment based on market fluctuations and consumers’ energy usage.

One of the main advantages of going with PPA is its low or no upfront cost for consumers. It reduces the burden of purchasing and maintaining the solar infrastructure. Other advantages may include predictable energy costs and performance guarantees from the solar energy provider.

Apart from the advantages of PPA, there are some complexities that are also involved. These include contractual complexities, market regulatory dynamics, and technological advancement.The terms of the contract, performance guarantees, maintenance, pricing structures, market variables, system upgrade and improvements and flexibility to adopt efficient technology should be negotiated and stated in clear words to ensure mutual benefit for both parties.

Solar Leasing

Solar leasing is similar to PPAs, which allow homeowners or businesses to use solar energy without owning the solar energy systems. In leasing, the solar provider installs and maintains solar energy system, and the client has to pay the monthly lease payment. The duration of the solar lease is usually fixed. It ranges from 15 to 25 years. The monthly lease payments are predetermined, and maintenance costs may or may not be included. At the end of the lease agreement, the homeowner can either purchase the solar infrastructure at a predetermined rate or renew the lease agreement. Or he can just put off the solar energy system, and the provider can take it back.

Although the PPA and lease are somewhat the same, there is a very minute difference. In both cases, the solar infrastructure is owned by the provider. The duration in both cases is extendable. The agreement can be renewed in both cases. Both have predetermined monthly payments, but in the case of PPA, the energy rates are predetermined and the monthly payment depends on the consumption of the homeowner or business. However, in the case of a solar lease, there is a predetermined fixed lease payment, irrespective of the monthly energy consumption.


Frequently Asked Questions

There are multiple options like solar loans, solar leases, and PPAs, which do not involve upfront charges and can be paid in the form of monthly payments.


The solar loan and solar lease both involve monthly payments, but the solar infrastructure is owned by the homeowner in the case of the solar loan, while in the case of solar lease, the lease provider owns the system.

In a PPA and solar lease, the system is owned by the PPA or lease provider, and the homeowner has to pay the monthly payments. In PPA, the energy rates are predetermined, and the homeowner has to pay according to his energy consumption. But the monthly payments in a solar lease are also predetermined but fixed, irrespective of the monthly usage of the homeowner.

We recommend you go with a solar loan, as you will be the owner of the system, as compared to the other options, in which the infrastructure always remains the property of the provider even at the end of the lease or PPA’s terms.


It depends on how long you are going to carry the loan. If you are planning to pay off the loan early, in 7 to 12 years, you should go for the same as cash loan plan, which has a higher APR but the loan amount remains the same as cash. But if your concern is small monthly payments, then you should go for the lowest APR and longest loan term.