Finance for solar panels
Published 11th December 2017
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 -
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% -
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).
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-
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-
Rates can be anywhere from 2% -
A total re-
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 0800 304 7880.