Are Secured or Unsecured Solar Loans Better for You?
Solar loans make investing in a home photovoltaic system easy and affordable for homeowners throughout the Intermountain West.
Most solar lenders require little or no money down. And unlike leasing, solar panel financing allows you to retain ownership of your photovoltaic energy system. That means you can take advantage of the 30 percent federal tax credit, as well as other lucrative state and local financial incentives.
Many banks, credit unions and private lenders offer secured and unsecured solar loans.
What’s the difference between these financing options? And which type of loan is right for you?
What Are Secured Solar Loans?
Secured solar loans require you to provide some sort of collateral, typically your house. Home equity loans and lines of credit, FHA loans and PACE loans are all similarly secured by collateral.
With this type of loan, the lender places a lien on your property, and if you fail to repay the loan according to the terms, they can take possession.
Since secured solar energy loans put less risk on the lender, they typically have lower credit score requirements and lower interest rates than their unsecured counterparts. And in most cases, the interest you pay is tax-deductible.
However, to qualify for a secured loan, you will need a favorable debt-to-income ratio, as well as sufficient equity in your home.
What Are Unsecured Solar Loans?
Unsecured solar energy loans do not require collateral. Financing a photovoltaic system installation with an unsecured loan means you don’t have to put your house or other property on the line.
However, as these loans pose an increased risk for lenders, they usually come with higher interest rates. And the interest paid on these loans is probably not tax-deductible.
The biggest benefit of this option is that most homeowners can quickly qualify for unsecured solar energy loan programs. Many professional solar contractors, including Intermountain Wind & Solar, offer financing for photovoltaic installations.
Choosing How to Finance Your Photovoltaic Installation
Because secured loans have lower interest rates, they offer a better long-term value for homeowners. A secured loan may be a good option if you have enough home equity to cover the cost of a photovoltaic installation.
If you don’t have enough equity, an unsecured loan is the way to go, especially if the interest tax deduction is not a pressing concern for you.
An unsecured loan is also more attractive if time is a factor. Secured solar loans can take weeks to finalize, delaying your photovoltaic system installation. With many unsecured loan providers, you can be approved within minutes.
Would you like to learn more about your photovoltaic financing options? The professional solar contractors at Intermountain Wind & Solar assist homeowners throughout Utah, Idaho, Nevada, Colorado and Wyoming in finding the best way to invest in photovoltaic power. Contact us today to learn more about solar loans and other finance options.