Solar Panel Finance: What Are The Options?

Solar panels are one of the most effective ways to reduce electricity bills and move towards a more sustainable lifestyle. 

In fact, the International Energy Agency has labelled solar as the cheapest form of electricity in history. It makes sense – enough solar energy hits the Earth per day to cover 10,000 times the world’s total energy use!

However, the cost of installing a solar panel system can be a significant upfront expense for many homeowners. This is where solar panel financing comes in to help spread out the cost of your solar investment. The idea is that it can make solar power more accessible to the masses.

If you’re considering solar panels but are unsure of how to finance them, we’re here to help you assess your options. We’ll take a look at the most common financing options available for purchasing solar panels in the UK, discuss eligibility requirements and evaluate the benefits and costs of each option. 

What does solar financing mean?

Solar panel financing refers to paying for your system in instalments rather than covering the entire solar panel cost upfront. This makes it easier for homeowners to install solar panels without having to part with a large sum of money all at once. 

Financing options generally allow you to spread payments over several years. This can be anywhere from 1 year to 20 years. If you’re thinking about solar panel finance, here are some key things to keep in mind:

• Interest rates – These can vary widely. Over time they may significantly increase the overall cost of your solar panels to the tune of several thousands of pounds. 
• Deposits – Some solar finance options require an initial deposit, whereas others don’t. This all depends on the company.
• Payment terms – Financing plans can range from short-term (several months) to long-term (up to 20 years). The longer the payment terms, the more you will pay back in total. 
• Additional costs – Always make sure there are no hidden fees before you enter into a finance agreement.
• Good reviews – Try and go for a company with a good track record and verified positive reviews

Are you eligible for solar panel financing?

To apply for solar panel finance, you’ll need to meet certain eligibility criteria. These can vary depending on the lender or installation company, but generally speaking the basic requirements include:

• Age – Most finance providers require applicants to be at least 18 years old, with an upper limit around 85 years old.
• Residency – Applicants need to be UK residents.
• Proof of address – You may need to provide proof of address, such as recent utility bills and identification documents (passport, driver’s licence).
• Income – A minimum joint gross income of around £10,000 per year is usually required.
• Credit history – A good credit history is necessary as lenders will perform a credit check.
• Homeowner – Most finance options include you being the owner of the home where you want solar installed. 

If you meet these requirements and have a bank account to set up direct debit payments, you should be eligible to apply for solar panel finance.

Overview of solar finance options

There are several different financing options available for homeowners considering solar panels. Here are the most common ones:

• Monthly payment options – Many solar installation companies offer payment plans in partnership with third-party lenders, allowing you to pay for your solar panels in monthly instalments over several years. Interest rates and repayment periods vary, so it’s important to compare offers.
• Subscription models – Some installers now offer subscription plans, where you pay to use solar panels over a fixed period (say 20 years), often with maintenance included. At the end of the term, you should have the option to buy the system outright.
• Personal loans – You can take out a personal loan from a bank or financial institution to finance your solar panels. Personal loans offer flexible terms but may come with higher interest rates than other financing options.
• Green mortgages – Some homeowners choose to extend their mortgage or remortgage their property to cover the cost of solar panels. Green mortgages are designed for energy-efficient home improvements and may offer lower interest rates.

Is it better to finance solar panels or pay cash?

The other option is to pay for your solar panels upfront. Of course, this isn’t a finance option but it’s the best option in terms of overall costs. By paying cash, you avoid interest payments and start benefiting from lower electricity bills immediately. The return on investment is quicker, and you won’t be locked into any financing agreements.

This all depends on if you have the financial means to afford it. That said, financing may be the more practical solution if paying upfront isn’t feasible. Many financing options offer manageable monthly payments that allow you to benefit from solar panels without the large initial expense. 

If you can secure 0% financing, this can be an excellent way to spread out the cost without significantly increasing the total amount you’ll pay. 

Solar panel financing 

Let’s take a look at the solar panel financing options in a little more detail. 

Monthly payment options

One of the most common ways to finance solar panels is through monthly payment options arranged by the installation company. This can be through the company or via a third-party lender they have an agreement with. These plans allow you to spread payments over a period ranging from a few months up to 20 years. 

Some solar companies offer low-interest or even zero-interest finance deals for a certain time to encourage homeowners to make the move. It’s important to carefully check the terms and conditions of these offers, as longer repayment periods tend to increase the total amount you’ll end up paying. Whilst monthly payments make solar more affordable upfront, it’s important to bear in mind that financing means paying more overall due to interest.

Key points about monthly payment options include:

• No deposit or low deposit required – Some plans don’t require an initial deposit, but up to 50% may be paid upfront in some cases.
• Flexible repayment schedules – You can choose to spread the cost over a period that suits your financial situation.
• Overpayment allowed – Most plans allow overpayments, so you can reduce your loan faster without penalties.
• Full consumer protection – These loans should be regulated, providing legal protections for the consumer.

Subscriptions

Subscription models are a newer type of solar financing that has gained popularity in recent years. Under a subscription model, you don’t own the solar panels outright but instead pay a regular monthly fee to use them over a fixed period. 

A subscription can last as long as 20 years. At the end of the subscription term, you may have the option to purchase the solar panels at a minimal cost or have them removed. This allows homeowners to benefit from solar without committing to ownership from the start.

The main benefit of a subscription model is the low or even zero upfront cost. However, no one wants their solar panels removing at the end, so be sure to check out the final payment terms. Also keep in mind that subscription payments may increase over time, so carefully review the contract terms before committing. Ask as many questions to your solar panel installer as possible. 

Subscriptions often come with a maintenance and servicing agreement, which is a benefit, but isn’t really needed when it comes to solar panels as they are very low maintenance. This is more of a nice-to-have if anything goes wrong.

Personal loans

Personal loans are another viable option for financing solar panel installations. A personal loan for solar panels can be arranged through a bank, building society or another financial institution. 

These loans can be secured (which often come with lower interest rates) or unsecured (which usually come with higher interest rates), depending on your credit score and the lender’s terms.

Interest rates for personal loans can vary widely, with some lenders offering 0% APR for up to three years, whilst others may charge up to 15% APR. The advantage of personal loans is their flexibility, allowing you to choose repayment terms that fit your financial situation. 

People often use a personal loan if the finance arrangements by the solar company aren’t particularly favourable. It’s worth shopping around for the best interest rates and loan conditions to ensure you’re getting the best deal possible – even a small difference in interest rate can lead to thousands more being paid over the life of the loan.

Green mortgages

Another good option for homeowners is to finance solar panels through a green mortgage. They tend to offer better interest rates than personal loans or standard mortgages.

Green mortgages are designed to fund energy-efficient home improvements, including solar panels, insulation and heat pumps. They’re available when remortgaging or buying a home with an EP rating of A or B. Remortgaging allows you to extend your current mortgage to cover the cost of installing solar panels.

It’s worth discussing your options with your mortgage provider, especially if you already have relatively favourable mortgage terms. Many lenders will consider solar installations an improvement that adds value to your home, making it easier to extend your mortgage or secure a green mortgage.

Are there government grants available for solar panel financing?

In the UK, there are several grant schemes for solar panels, but these are specifically aimed at low-income households. Two of the most important schemes are the ECO4 scheme and the Home Upgrade Grant, both of which provide financial assistance to help make solar panels more accessible.

• ECO4 Scheme – This government initiative helps low-income, fuel-poor and vulnerable households receive support for installing solar energy systems. Eligible households can potentially receive free solar panels. The ECO4 scheme will run until 31 March 2026.
• Home Upgrade Grant – Homeowners and landlords in certain areas of England can apply for up to £10,000 in funding through this grant. It supports improvements in energy efficiency, including solar panel installations, for homes with an EPC rating of D, E, F or G. To qualify, households must also have an income of £31,000 or less and be off the gas grid.

For mid to high income households, there aren’t any UK-wide grants available. However, there is currently a VAT relief on solar panels, which has been reduced to 0% – essentially giving you a 20% discount. This scheme is running until 31st April 2027, when it will then return to the reduced rate of 5%. 

Evaluating solar panel costs and benefits

According to the Energy Saving Trust, solar panels can reduce your electricity bills by up to 70%, depending on your energy usage and system size. With solar panels usually lasting for around 30 years, they will give you significant long-term savings on energy bills that should reach into the tens of thousands. 

Although paying for solar panels upfront is the most cost-effective option, financing offers a more accessible alternative for many homeowners. It’s a similar situation to car ownership where there are several popular options into PCP (similar to monthly payment options), higher purchase agreements (similar to the subscription model) and standard car loans. 

The key to all of this is evaluating the interest rates and terms of each financing option carefully. Doing this will make sure the long-term costs don’t outweigh the savings you’ll achieve from your solar panels.

If you opt for financing, the average payback period for solar panels is around 8-10 years, after which your solar system will effectively be providing free energy for the remainder of its lifespan.

Should I finance a solar battery too?

Adding a solar battery to your solar panel system can greatly improve the benefits of your solar generated energy. Solar batteries store excess electricity generated during the day for use in the evening or when the sun isn’t shining. This helps you rely less on the national grid and increases your savings through using your own renewable energy supply.

However, financing a solar battery will increase the initial loan amount or monthly payments, so it’s important to assess whether this fits your financial circumstances. Whilst the upfront costs will be higher, having a solar battery can shorten your overall payback period.

If you can afford it, financing a solar battery alongside your solar panels may be a worthwhile investment and one we’d recommend. 

Check out our guide on solar battery storage explained for a run down of the key information and see our post on battery storage price for comparison. 

Next steps with solar panel financing

Solar panel financing offers a range of options for homeowners looking to benefit from renewable energy without the high upfront cost. Whether you choose to pay for your solar panels in monthly instalments, take out a personal loan, opt for a subscription model or use a green mortgage, it’s essential to compare the interest rates, terms and conditions of each option carefully.

Whichever option you choose, solar panels are a long-term investment that can reduce your electricity bills significantly and give you savings across the next 30 years or more.