Best Ways to Finance Solar Panels: How to Finance Solar Panels Without Overpaying

The main ways to finance solar panels are paying cash, taking a solar-specific loan, borrowing against your home equity, using PACE financing where it exists, or letting a company own the system through a lease or power purchase agreement (PPA). The best way to finance solar panels is the one with the lowest total cost over the full term that you can comfortably afford, so compare every offer against the system's cash price rather than the monthly payment.

Key takeaways

• Always ask for the cash price first. Federal regulators warn that fees added to solar loans can make an interest rate look lower than it really is.
• Owning (cash or loan) and renting (lease or PPA) are different deals: with a lease or PPA, the company owns the system and generally keeps the incentives.
• Per the IRS, the federal residential clean energy credit is not available for property placed in service after December 31, 2025. It is claimed for the tax year the property is installed.
• Liens matter. PACE puts a property tax lien on your home, and some loans and leases put a filing on your title.
• Shop at least a bank or credit union offer against the installer's financing before you sign anything.

How to finance solar panels: the six main options

The FTC and the U.S. Treasury describe the same basic menu. You can buy the system with cash, buy it with borrowed money, or sign a long-term contract with a company that owns the equipment on your roof. Here is how the options line up.

Option	Who owns the system	Upfront cost	Main risk to watch
Cash	You	Full price	Tying up savings; overpaying without competing quotes
Solar-specific loan	You	Often low or none	Hidden dealer fees; payment jumps if you miss a planned lump-sum paydown
Home equity loan or HELOC	You	Closing costs may apply	Your home is the collateral; HELOC rates usually change
PACE financing	You	Usually none	Property tax lien that takes priority over your mortgage
Lease	The company	Often $0	Fixed payments that may rise yearly; hard to end early
Power purchase agreement	The company	Often $0	Per-kWh price that may rise yearly; transfer rules when you sell

Sources: FTC "Solar Power for Your Home" and U.S. Treasury solar consumer advisory, checked November 2026.

Paying cash: simplest contract, biggest check

When you pay cash, you pay the whole cost when the system is installed and you own it from day one. The FTC notes that owners may qualify for state or local incentives and may receive renewable energy certificates where those exist. There is no interest, no lender, and no lien from a finance company.

The trade-off is liquidity. Draining an emergency fund for a 20-plus-year asset is a real risk. Cash buyers also lose the leverage of a lender's review, so getting several itemized quotes matters even more. Treasury suggests comparing the work, materials, costs, output guarantees and warranties across multiple bids.

Solar loans: convenient, but read the fee and payment schedule

Solar-specific loans are usually arranged by the installer at the kitchen table. In its August 2024 Issue Spotlight on solar financing, the CFPB reported that these loans typically have terms of 8 to 25 years and stated APRs that typically range from 1% to 7%. The catch is what the stated APR leaves out.

• Dealer fees. The CFPB found that fees typically run 10% to 30% of the cash price and can exceed 50%. They are added to the amount you borrow.
• Payment jumps. Many loans assume you will make a large prepayment, often 30% of the principal. If you do not, the CFPB says many loans re-amortize at a higher monthly payment starting around month 19.
• Collateral. Some solar loans are secured by a lien on the panels, and lenders commonly file notices against the equipment.

The planned prepayment was usually built around the federal tax credit. With the 25D credit no longer allowed for systems completed after 2025, a loan designed around a credit you will not receive is a serious mismatch. Our guide to solar loan rates, terms and fees walks through how to read one line by line.

Home equity loans, HELOCs and PACE: borrowing against the house

The FTC notes that a system can be financed through a traditional home equity loan or similar bank or credit union financing. A home equity loan pays out a lump sum, while a HELOC lets you draw and repay up to a limit, and the CFPB says HELOCs usually have adjustable rates. Both are second mortgages, so your home is the collateral.

PACE (Property Assessed Clean Energy) is different. It is offered only in some states, usually through contractors, and you repay it through your property tax bill. The FTC warns that a PACE lien takes priority over your mortgage and that some mortgage contracts do not allow this type of lien. Fannie Mae's Selling Guide, updated November 4, 2026, says homes with solar panels financed through PACE are ineligible for its loans unless the PACE balance is paid in full at or before closing. That can matter a lot when you later sell or refinance.

If you are weighing equity against a solar-specific loan, see our side-by-side on home equity loans vs solar loans.

Leases and PPAs: paying for solar without owning it

With a lease, you pay a set monthly amount to use the system. With a PPA, you pay a set price for each kilowatt-hour the system produces. In both cases the company owns and usually maintains the equipment. The FTC adds that lessees do not get the tax credits, incentives or renewable energy certificates, which go to the owner.

Points to check in any lease or PPA:

• Escalators. The CFPB found PPA escalators of 1% to 5% a year. A NYSERDA homeowner guide notes that escalators compound over the term.
• Term length. EnergySage (updated October 2026) says leases typically run 20 to 25 years.
• Early exit. The FTC warns it may be difficult and expensive to end a lease before the term is over.
• Selling your home. Ask whether a buyer must pass a credit check and pay fees to take over the contract.

For a deeper comparison of owning versus renting the panels, read solar lease vs buy.

Which way to finance solar fits your situation?

There is no single best answer, but your circumstances narrow the field quickly.

• You have savings and plan to stay put: cash usually has the lowest total cost, as long as you are not overpaying for the system itself.
• You want to own but not pay upfront: compare a credit union or bank loan with the installer's loan. Make the installer quote the same system at a cash price so you can see any fee.
• You have substantial home equity and steady income: a fixed-rate home equity loan may be worth pricing, but remember the house secures it. Check rates and terms with more than one lender.
• You want little responsibility for repairs and may not owe much tax: a lease or PPA can work, provided the escalator, buyout and transfer terms are clear.
• You expect to sell within a few years: look hard at transfer rules and liens, because they affect the sale.

Whatever you choose, do not rely on promised savings. The FTC points out that projections depend on future utility rates, which are hard to predict. Compare offers against your actual bill and today's price per kWh, which averaged 18.16¢ nationally in August 2026.

Red flags in any solar financing offer

Federal and state regulators list the same warning signs again and again. Walk away, or at least slow down, if you see any of these:

• The salesperson will not tell you the cash price. The CFPB says to ask for it directly and to get a written breakdown of the work, materials and cost of each.
• The loan amount shown has a projected tax credit subtracted from it.
• You are pressed to sign today, sign on a tablet without reading, or sign blank documents. The Oregon Department of Justice's 2026 consumer guide lists pressure to sign today and blank documents as red flags.
• The offer is described as a "government program" or "free solar."
• The written contract does not match what the ads or salesperson promised.

If a sale happens in your home, the FTC's Cooling-Off Rule generally gives you until midnight of the third business day to cancel covered sales, and some states add more protection. Ask about your cancellation deadline before you sign.

Next steps

Get at least three itemized quotes, ask each installer for its cash price, and get one loan offer from your own bank or credit union to compare. Then run the numbers through our solar quote checker to see whether the price and financing terms look reasonable, and research the installer and lender on our solar company pages before you commit.