Can I Use a Personal Loan for Solar Panels in 2025?
Installing solar panels can be a smart choice whether you want to reduce your carbon footprint or your monthly bills. According to the U.S. Department of Energy, there are more than a million solar installations across the country, and this form of renewable energy can be used anywhere.
If you’re intrigued by the idea of helping the environment while also saving on energy costs, keep reading to learn more about solar panels, how much you pay for them, if you can use a personal loan for solar panels, and other ways to purchase them.
What’s So Good About Solar Panels?
The benefits of solar panels fall into two categories:
Financial
While solar panels have an upfront cost, homeowners can save $10,000 to $30,000 on their energy bills over the lifetime of a system. That’s according to EnergySage, an online solar marketplace with partners including the U.S. Department of Energy and regional energy companies.
Environmental
Solar energy is considered clean energy because it does not emit air pollution or greenhouse gases. While manufacturing solar panels can require additional energy, systems usually create enough electricity to offset the amount used in their creation within one to four years, according to the U.S. Energy Information Administration.
Although the actual benefits of solar panels may depend on your location and the system installed, many experts and homeowners agree that adding solar panels to your home can be worth the initial expense.
Compare rates, terms, and more, and find a personal loan for solar panels today.
Unsecured Loans for Solar Panels
Of all the ways to finance the purchase of solar panels, an unsecured loan may be the easiest and most flexible method. These loans don’t require any collateral, won’t put a lien on your home, and can often be applied for in minutes.
Here are our top picks for where to get an unsecured personal loan to pay for solar panels.
Best Egg: Best for Quick Funding
Why we chose it: Best Egg is known for quickly distributing loan funds if you want to start your project quickly.
You can check your eligibility without affecting your credit score, and with their fixed rates, you don’t have to worry about your loan payments increasing in the future.
Best Egg Pros and Cons
Loan amounts: $2,000 – $50,000
Fees: Origination fee of 0.99% – 8.99% of loan amount
Terms: 3 or 5 years
SoFi: Best for No Fees
Why we chose it: For a fee-free option, check out the personal loans offered by SoFi.
The company boasts an easy application process and distributes money on the same day in most cases.
If you lose your job, SoFi’s unemployment protection will modify your payments until you return to the workforce.
SoFi Pros and Cons
Loan amounts: $2,000 – $50,000
Fees: No fees
Terms: 2-7 years
LightStream: Best for Consistently High Rates
Why we chose it: LightStream has some of the best rates available for unsecured loans, although you’ll need to have great credit to be approved. Applications are processed quickly, and you could receive funds on the same day your loan is finalized. There are no fees with LightStream either.
LightStream Pros and Cons
Loan amounts: $5,000 – $100,000
Fees: No fees
Terms: 2 -12 years
Upgrade: Best for Transparency
Why we chose it: Upgrade gets high marks for its transparency. It clearly lays out repayment options so you can compare monthly costs with different loan options and make the right choice for your budget. The company also lets you check your loan eligibility without any impact on your credit.
Upgrade Pros and Cons
Loan amounts: $1,000 – $50,000
Fees: Origination fee of 1.85% – 8% of the loan amount
Terms: 2 – 7 years
ezSolar Loans: Best for Flexibility
Why we chose it: There are three lending options available through ezSolar Loans, and its fixed-rate term solar loan features low APRs and longer repayment terms. You’ll need to work with an approved solar installer, and funds will be sent directly to that contractor. This makes paying for your project hassle-free.
ezSolar Loans Pros and Cons
Loan amounts: $10,000 – $100,000
Fees: There is no loan origination fee, but a lien on the solar equipment can result in a $100-$300 fee being rolled into the project cost.
Terms: 12, 15, or 20 years
How to Get an Unsecured Loan for Solar Panels
The application process for many unsecured loans is very simple, but before you submit anything, follow these steps.
Check Interest Rates
Interest rates for unsecured loans can vary widely, with some charging as little as 5.99% and others as much as 35.99%. Obviously, the lower the interest rate, the lower your loan costs.
Most lenders advertise a range of rates. The lower rates are for those with excellent credit, while those with lower credit scores may pay more interest.
Check Your Credit Score
Checking your credit score can help you determine what type of rate you can expect to receive. Scores of about 670 are considered good, but a score higher than 700 will likely improve your chances of receiving a lower interest rate.
Many banks and credit card companies, such as Discover, offer their customers free access to credit scores. Otherwise, you can use a free service like CreditWise from Capital One to check your score.
If your score is low, it might be a good idea to spend a few months working to improve it before applying for an unsecured loan. Timely payments and paying down debt are two good ways to boost a score.
Compare Loans
Once you think you’re ready to apply, it’s time to take a closer look at various lenders. You’ll want to look for the following:
Fees
Some loans have origination fees. These fees are intended to cover a lender’s cost to process your application and extend the loan. They are usually deducted from your loan amount rather than paid out of pocket. Lenders might also have other fees, such as pre-payment penalties.
Terms
The term is how long it will take you to pay off a loan. A short-term means you’ll be out of debt faster, but your monthly payments will be higher. If you need to borrow a large amount, a longer term may make payments more affordable.
Interest rates
Again, you won’t know your exact interest rate until you get to the next step, but a lender should have a range available on its website.
Get Prequalified
Many lenders now offer prequalification. This means they can look at your financial picture without negatively affecting your credit score. In this way, you can learn what your specific interest rate might be.
Many lenders have a “check my rate” option that serves the same purpose as prequalification. To get your rate, you may need to provide the following:
- Contact information
- Annual income
- Homeownership status
- Employment status
- Social Security number
However, the prequalification process can vary by lender
Finalize Application
After you are satisfied that you have found the best loan for your solar panel installation, it is time to finalize your application and submit additional information. This may include documents to verify income or assets.
A lender will also ask for information regarding where you’d like the loan proceeds deposited. In some cases, after approval, you could have money in your bank account by the end of the day.
Benefits of Solar Panels
As mentioned above, solar panels have financial and environmental benefits. For instance, installing solar panels at your home could mean you get the following:
Tax Credits
According to TurboTax, the federal government offers a tax credit equal to 30% of the cost of qualified solar power equipment. The credit may apply to storage equipment and some installation costs as well.
Check with your accountant or tax preparer for more details. There may also be state tax incentives available.
Lower Energy Costs
Energy savings due to solar panels will vary depending on the type of equipment installed, your geographic location, and the cost of energy in your area. However, EnergySage estimates 20-year savings to range from $9,748 in Washington state to $34,056 in Massachusetts.
Enhanced Home Value
When it comes time to sell your home, having solar panels installed could help up its price.
Nationwide, homes with solar panels sell for 4.1% more than comparable properties, according to 2019 research from the real estate website Zillow. That translates into an extra $9,274 for a median-priced home.
Less Impact on the Environment
The Solar Energy Industries Association says the U.S. solar industry has the same impact on carbon in the atmosphere as 2 billion trees.
EnergySage notes that a 6kW solar panel system could be expected to reduce carbon emissions by 6.3 metric tons per year, which exceeds the annual emissions of a typical vehicle that runs on fossil fuels.
However, the benefit of your home’s solar panels will, again, depend on where you live and the source of the energy it is replacing.
Drawbacks of Solar
The main drawback to solar power is the initial cost. According to the Center for Sustainable Energy, a residential solar energy system costs between $3 and $5 per watt, which equates to $15,000 – $20,000 for a 5kW system.
But don’t forget that federal, and maybe even state, tax credits are available that could reduce out-of-pocket costs. Once those credits are calculated, the cost of a 5kW system could drop to $10,592, according to the Solar Action Alliance.
That cost is broken down into the following:
- Operational expenses related to design, permits, and connections: 45%
- Solar panels: 25%
- Inverter: 10%
- Installation: 10%
- Balancing of the system: 10%
More Ways to Finance Solar
While an unsecured personal loan can be a quick and convenient way to finance solar panels, it is not your only option.
Here are some other solar panel loan choices:
In-House Financing
Some solar panel installation companies offer their own financing.
These loans can be convenient since you are doing everything through one company.
That eliminates the need to receive funds from a loan and then pay the installer. A drawback to these loans is that you may end up paying more interest than you would elsewhere.
Home Equity Loan
A home equity loan is a line of credit taken out against the value of your house.
These loans are flexible, and depending on the lender, money may be accessed via a debit card, check, or direct deposit to your bank account.
In this way, you can borrow exactly what you need and not a dollar more.
However, the process for applying for a home equity loan is significantly more involved than that of a personal loan.
Cash-Out Refinance
If you have enough equity in your home, you could refinance your mortgage and walk away with cash at closing.
Known as cash-out refinances, these loans have tax benefits, such as the ability to deduct interest on one’s itemized federal income tax returns.
However, these loans have become less attractive, with interest rates rising now.
Frequently Asked Questions
Yes, a personal loan can generally be used for any purpose, including purchasing and installing solar panels. These loans typically have simple applications, competitive rates, and a variety of repayment options. Some may even pay out funds on the same day an application is finalized.
Like any other loan, money borrowed for solar panels will show up on your credit report. That means the balance owed and your payment history will be factored into your credit score.
Missing payments could hurt your score, but if you make your payments on time and steadily pay down the balance, you may find the loan actually helps improve your credit history.
Both approaches can be argued for. Paying cash can be cheaper in the long run because you don’t pay interest.
However, if that means wiping out your savings, it could leave you financially precarious should an emergency arise. Financing with a fixed rate provides for predictable payments and lets you preserve your cash reserves.
An internet search is one way to find a solar panel installer in your area.
These professionals, also known as photovoltaic installers, can be certified through the North American Board of Certified Energy Practitioners. The NABCEP recommends using a site like SolarReviews.com to find local installers.
You can use a calculator on SolarReviews.com to determine what system is adequate for your needs and region.
According to solar company SunPower, you can generally do the calculation by multiplying your hourly energy needs by the peak sunlight hours in your area and then dividing the answer by a panel’s wattage.
Don’t overlook the fact that panels can be heavy. Ensure your roof can structurally handle the extra weight.
