Personal Loan for Solar Panels: Financing Options Compared
Personal loan for solar panels vs HELOC, PACE, installer loans and leases: how each works, the risks, and what changed now the federal credit has ended.
Short answer: a personal loan can pay for solar panels. It is unsecured, so your home is not collateral, and funding can be quick. It usually costs more than a home equity product, and the picture changed for 2026 because, per the IRS, the federal Residential Clean Energy Credit is not available for property placed in service after December 31, 2025. This page compares ways to finance solar. If you want payment math for a specific project size, read our companion guide, solar panel installation loan costs and payments.
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What Changed: The Federal Credit
The IRS Residential Clean Energy Credit page states that the credit is 30% of the cost of qualifying property and that it is not available for property placed in service after December 31, 2025. Older articles, including earlier versions of this one, may still describe the credit as available. If you are budgeting a 2026 or later installation, do not count on a federal credit, and confirm your situation with a tax professional. State, utility, and local incentives may still exist and vary by location; check your state energy office and utility before you sign anything.
This matters for financing because many solar loans were structured around using the credit to pay down principal. Without it, the loan payment is the full cost of the system over time.
Solar Financing Options Compared
| Option | Collateral | How you repay | Main trade-off |
|---|---|---|---|
| Unsecured personal loan | None | Fixed monthly payment | Rates are often higher than secured products |
| Home equity loan or HELOC | Your home | Fixed or variable payments | Lower rates are possible, but default can put your home at risk |
| Installer or dealer loan | Varies | Fixed payments | Fees may be built into the rate |
| PACE financing | Lien on your property | Added to your property tax bill | Lien, resale complications |
| Solar lease or power purchase agreement | You do not own the system | Monthly lease or per-kWh payment | You do not own the equipment; contract transfers on sale |
| Cash or savings | None | Paid up front | Ties up savings |
Home equity products typically carry lower rates than unsecured loans because the home secures them, but approval takes longer and a default can put the home at risk. See personal loan vs. HELOC for home improvement.
PACE loans are repaid through your property tax bill. The CFPB explains in What is a PACE loan? that the upgrade costs come due through an extra assessment and that you may lose your home if you do not make the payments. Check how the assessment is handled if you sell or refinance.
Installer loans are convenient but may be arranged through a third-party lender, with fees sometimes folded into the rate. Ask for the APR in writing and compare it with other quotes. Our guide to contractor financing vs. personal loans explains what to ask.
Leases and power purchase agreements avoid a loan but mean you do not own the system. Read the contract for escalator clauses and what happens when you sell the home.
When a Personal Loan Is the Practical Choice
- You do not have enough home equity, or do not want to put your home up as collateral.
- You want a fixed rate and a set payoff date.
- You need funds faster than an appraisal-based product allows.
- The installer's financing is hard to evaluate or uses deferred interest.
Strong credit tends to narrow the gap between personal loan and equity rates, but nobody can promise what you will be offered or whether you will qualify.
What Does a Solar Project Cost?
As reported by the U.S. Department of Energy's quarterly Solar Industry Update (Fall 2025 edition), average U.S. residential system pricing in the first half of 2025 ranged from $3.2 to $4.2 per watt DC across modeled and reported methods. National averages do not capture local prices, battery add-ons, roof work, or permitting. Get several written quotes with system size, equipment, and total price.
Payment Math: Why Term Length Matters
This is an illustrative calculation using the standard amortization formula for a hypothetical $20,000 loan, not a quote and not a suggestion to borrow that amount. The 11.9% rate is a reference point: the Federal Reserve's G.19 release reported that average for 24-month bank personal loans in August 2026 (preliminary). Longer solar loan terms typically carry other rates.
| Term | Monthly payment at 11.9% | Total interest |
|---|---|---|
| 5 years | $443.88 | $6,633 |
| 10 years | $285.79 | $14,294 |
At a higher illustrative 17% APR, the 5-year payment would be $497.05 with $9,823 of interest, and the 10-year payment $347.60 with $21,711 of interest.
Compare total repaid, not just the monthly payment, and weigh it against your expected electric bill savings, which vary by location and usage. Use the loan calculator or APR calculator to run your own figures, and see the $20,000 personal loan page for context at that size.
What to Check Before You Sign
- APR vs. interest rate: APR includes the origination fee. See origination fees vs. APR.
- Prepayment penalty: Confirm there is none if you may pay the loan down early.
- Funding timeline: Make sure it matches your installer's deposit schedule.
- Fixed vs. variable rate: Personal loans are usually fixed; see fixed vs. variable rate loans.
Comparing Offers Without Hurting Your Credit
Prequalification generally uses a soft inquiry that does not affect your score. A formal application typically triggers a hard inquiry. See soft vs. hard inquiries. For other home projects, see our home improvement loan overview and HVAC replacement loans.
Questions to Ask an Installer About Financing
- Is the cash price different from the financed price, and by how much?
- What is the APR, not just the monthly payment, and what fees are included?
- Who is the lender, and who services the loan after installation?
- What happens to the contract if I sell the house?
- Is anything in the quote dependent on an incentive that has ended?
Frequently Asked Questions
Can I use a personal loan to buy solar panels? Yes. Most lenders do not restrict use of an unsecured personal loan, and some solar companies accept payment from loan proceeds. Approval is not guaranteed.
Is the federal solar tax credit still available? According to the IRS, the Residential Clean Energy Credit does not apply to property placed in service after December 31, 2025. Confirm your own tax situation and look into state and utility incentives.
Is a personal loan or a home equity loan better for solar? Home equity products often have lower rates but use your home as collateral. A personal loan is unsecured and usually faster, at a typically higher cost.
Are solar loans secured or unsecured? Both exist. Personal loans are unsecured; some installer loans and all PACE financing involve a lien or other security.
What credit score do I need for a solar loan? Lenders set their own standards. See what credit score you need.
Can I pay off a solar loan early? Many personal loans allow it without penalty, but check your agreement. See paying off a personal loan early.
What to Do Next
Collect at least two installer quotes, get your own financing quotes before accepting the installer's, and compare prequalified offers with a soft credit check.