A solar loan generally refers to any loan that enables an individual to finance the solar panel system on his or her home. This also has a narrower meaning, and that pertains to a loan offered by solar installers in collaboration with specialized financing companies or similar firms.
Understanding the real cost of loans and interpreting solar loan quotes is important. You also need to ask about the solar loan quote to find out the amount added in any upfront rates and fees.
Getting a Solar Loan
To help and guide you accordingly when getting a solar loan in New Jersey, you need to be mindful of the process that is further highlighted below:
- Getting a solar loan starts with inviting a local solar installation company, Green Power Energy, over to your home. The representative of that company will sit with you and discuss the numbers.
- The company will then recommend a solar loan option that makes sense for you. With this solar loan, you will find out that you have different terms you can choose from such as 5 years, 10 years and 12 years. There are also other possible options such as the 15 years, 20 years, or even a 25-year program.
- Unlike the solar lease or solar PPA, the solar loan allows you to be the system owner.
- In solar, there’s a tax credit. The moment you receive this tax credit at tax time, it is recommended to put back towards the loan.
- After the tax credit is considered, the monthly payment to the loan company is set.
Setting An Example to Help Interpret Solar Loan Quotes
As an example, an 11.52 kW system, in year one of its 20+ year lifetime, the dollar amount of energy production comes out to $2,544 or $212/month. Great savings!
The 11.52 kW system isn’t totally free of course, it is worth $45,100, and you will need to make payments toward it over the lifetime of the system. Thankfully, in solar, there is a 30% tax credit. Once you received this tax credit at tax time, it is recommended that you put it back towards the loan, making the balance you are paying off come down to $31,570.
After the tax credit is considered, the monthly payment is now $261/month for 12 years. This means that with the $261 payment and the $212 in bill savings you are negative $49.
The final piece of the loan puzzle is NJ SRECS. This system will produce over 14 SRECs per year and the estimated monthly income from the SRECs is $252. This means your estimated monthly savings is $203 and $2,436 per year!
In fact, SRECs could lose 75% of their current value, and you would still be ahead. When analyzing a solar loan, subtract energy savings from your monthly payment and then add SREC income to understand the true savings.
