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Finance for solar panels

Pete Mugleston

To find out exactly what your eligible for and at what rates please fill out a quick enquiry form or give us a call on 0808 189 2301.

ASK THE EXPERT | The best ways to finance solar panels - By Alan Shaw

So you're considering an investment into solar panels, and are looking for ways to fund them. Its important to know before jumping into anything, that various different options exist. Not everyone is eligible for certain types of finance, so make sure you explore all your options and make your money work it's hardest for you.

Also, it goes without saying that you should always start off by speaking to a good solar panel company who can provide you a number of different options and quotes so you can be sure you're getting the best deal, and to help you get an idea of how much money you can make over the years to come.

Finance from the installation company

Often, solar panel companies will offer you a finance option with them or their tied lender, by way of unsecured borrowing like a personal loan. This earns them commission so they may lead you into thinking this is the best/quickest method - don't rush into anything. Sometimes they come with attractive rates or special deals, but it's crucial you check and compare fees, interest rates and small print, as you may be charged over the odds.

Unsecured loans

An unsecured loan (personal loan) is borrowing money without putting forward any deposit or other security. For this reason, if you were to run off and not pay it back, the lender would just loose their money. This is therefore seen as higher risk, which usually comes hand in hand with higher cost. You'd also be required to undergo a strict credit scoring process, where those with a lower score are given a higher interest rate. Rates can be anywhere from 6% - 50%+ depending on the lender and your credit score.

Personal loans tend to be flexible, as you can usually make unlimited overpayments. There may well be an early settlement fee for clearing the whole loan early, but due to Financial Conduct Authority regulation the maximum can only be up to 2 months interest, which may only be a couple of hundred pounds.

However, the restriction with a personal loan is the term over which you can borrow. In most cases the maximum term is 7 years, so if you were looking to minimise the monthly cost, then repayments are obviously going to be higher than if you stretched the borrowing over 10,20, maybe even up to 40 years (possible with a mortgage or secured loan).

Secured Loans

A secured loan is similar to a mortgage, whereby its secured on a property and can be borrowed over a long period. This difference is that the loan is a second charge, added on top of an existing mortgage (second in line to be repaid should the borrower default). For this reason, amongst others, the borrowing is seen as more risky to lenders than a first charge, and therefore usually comes with a higher rate.

Rates tend to be anywhere from 6-50%, depending on the lender, the applicants credit history, and on the loan to value of the resulting mortgage (borrowing up to 80% of the property value will come with a higher rate than 60%).

It is thought that borrowers with a more adverse credit history may find obtaining a secured loan easier than any other finance option, simply because of the type of lenders that occupy that part of the market currently.

Re-Mortgaging your existing property (often recommended where possible)

Usually, borrowing money on a property works out one of the cheapest, most cost effective, and sometimes flexible ways of borrowing (if you have access to the whole of the market).

The requirement along with acceptable affordability and credit score, would be that you have equity in your home available to borrow against. Usually the maximum you can borrow up to with a re-mortgage, would be 80% of the house value. So £80000 on a £100k property.

Rates can be anywhere from 2% - 15%, depending on the lender, the customers credit history, and on the loan to value of the resulting mortgage (borrowing up to 80% of the property value will come with a higher rate than 60%).

A total re-mortgage to borrow money for solar panels would involve repaying an existing mortgage, plus the extra required, in one larger mortgage. So someone borrowing £25000 for solar panels who has a £130000 mortgage with Halifax, could end up with a mortgage for £155000 with Santander. A re-mortgage may also be performed on a property with no current mortgage.

The effect of doing this means the entire loan is put over the same term and on the same low mortgage rate, rather than having the Halifax mortgage plus a loan on a higher rate.  As the borrowing is secured as a first charge (priority given over all other borrowing), the rate tends to be much cheaper than for personal and other secured loans.

Also as explained above, the effect on monthly payment by being able to borrow over a longer term, can make the proposition much more attractive.

To find out more information and discuss which would be the best way for you to finance your solar panels, please make an enquiry or give us a call on 0808 189 2301.