Solar Panel Loans: How to Use a Personal Loan for Solar?

Engineer and electrician team swapping and install solar panel

Like many people, you may have been thinking about going solar for a long time. There are a lot of reasons to go solar, but you probably don’t know much about the logistics of it yet. It will also require a large financial commitment in the beginning in order to install your new solar panels. You may even need to consider looking into solar panel loans. On the other hand, there aren’t really many disadvantages to going solar for individual homes, other than that you get less energy efficiency when you aren’t getting as much direct sunlight.

Types of Personal Loans to Help You Go Solar

If you haven’t spent much time researching loans before, it can be kind of confusing. There are different kinds of loans and lenders, and you can consider them all to decide which one is best for you.

Traditional Loans

Banks are traditional lenders, and most people think of banks when they think about applying for a loan. You hopefully have a bank that provides necessary services for you so you can manage your money and pay your bills. However, banks prefer customers with good credit, and they are more likely to offer poor terms to people with poor credit or even flat out refuse them. Banks can also take a long time to process a loan, which might not be good if you need the money soon.

Online Lenders

Online lenders used to be the ones people turned to if they had bad credit, but things have changed dramatically since then. Now online lenders are a great place to go when you need cash quickly, as you can get a response within 24 hours. If you search for a personal loan online, then you will also get a chance to compare rates among different lenders. You need to be careful though when using an online lender, and make sure you are dealing with someone trustworthy. Research well so you don’t fall victim to identity theft or fraud.

Fast Cash Loans

There are many personal loan options for good credit, but there are also some personal loan options for bad credit. Just like they sound, fast cash loans are available for people who need cash fast. Fast cash loans typically come in the form of payday loans or title loans. While you can get this type of loan really fast, you still need to be cautious. They typically have higher fees and interest rates than traditional loans. On the other hand, fast cash loans are much easier to get than traditional loans if you have bad credit.

Payday loans have very large interest rates and must be paid back by your next payday. Because you give the lender a postdated check — dated for your payday — for the full amount of the loan, you better make sure you have that money in your bank account when payday comes around.

Title loans require even more caution. Title loans use the title of your vehicle as collateral, which means that if you can’t pay them back, you will lose your vehicle. While lenders for payday loans will check your credit to make sure that you can pay the money back, lenders for title loans do not typically do this. Plus, their fees and interest rates are also very high, just like payday loans. The high amount you will have to pay back, plus having your vehicle put up as collateral makes this type of loan very risky for someone already struggling with money.

Secured Loans

Similar to title loans, secured loans require some sort of collateral; while this is typically a mortgage or a vehicle, other expensive items can also be used as collateral. Unlike title loans though, secured loans tend to have a lower interest rate, since the lender feels more secure and knows that if you cannot pay then they can just take whatever you are using as collateral.

Loans with Different Rates

Different loans have different rates and types of interest, and it is important to understand the difference between these different types of interest before you make a decision on accepting a loan offer. The two main types of interest are:

  •  fixed-rate
  • variable rate

Fixed rates are fixed, which means that you know what your interest rate will be like during the life of your loan. Variable rates are not fixed but rather changes over time, according to the prime rate. While a fixed rate is more dependable in terms of planning, but this rate tends to be a bit higher; on the other hand, you never know how a variable rate will increase or decrease over time, sometimes for the better and sometimes for the worse.

How to Use a Personal Loan for a Major Purchase – Solar Panel Loans

It will probably cost several thousand dollars to install solar panels, and it costs more or less depending on where you live. You will need to find a way to take out a loan for a more significant amount of money than an average personal loan. Taking out a personal loan for a major purchase is different in some ways from taking out a small loan.

Using Credit Cards for Major Purchases

Using a credit card for a major purchase is the same as taking out a loan. Credit cards are pieces of plastic that you can use to make purchases, and they are backed by banks. The banks earn their money off the transactions by charging various fees and interest rates. Credit card needs are very individualized, and they can even be a great way to build credit. You can charge some purchases with a credit card and then make monthly on time payments to build your credit rating. Lenders will look on you more favorably if you have a history of paying on time.

There are also zero interest credit cards that will allow you to make purchases and pay them back over a period of time with no interest. Normally the worst part of using a credit card for purchases is that they tend to charge higher interest rates than normal loans. You may be able to sign up for a special deal where the annual fee is waived and you have 9 to 12 months to pay off your purchase. The bad thing about that is that when the grace period is over you may be charged for the entire time you didn’t pay interest if you did not have the balance paid off in full.

How to Get a Personal Loan with a Low-Interest Rate

The downside to taking out a loan is that you will have to pay back not just the amount you borrow but the interest. Getting the best interest rate you can find will save you money and even help you pay your solar panel loans off faster. Borrowing money can be the right financial decision for you at the time, but you need to learn as much as you can about what kind of solar panel loans are available and what you are qualified for.

Make a Budget Before Borrowing

Before you actually take out your loan, make sure you have made out a budget that includes your monthly loan payment. You don’t want to make what seems like the right decision only to end up in trouble because you can’t pay back the money. Plan carefully so that you know how the money will fit into your budget and when you will pay off the loan.

What is a Low-Interest Personal Loan?

As discussed earlier, a personal loan is an unsecured loan that you take out and that you will have to pay interest on. Because you are going with a personal loan, you can spend the money any way you want without any input from the lender. Since the loan is unsecured, your interest rate and terms will be dependent on your credit score and income. You can use a low-interest personal loan to make a purchase or even consolidate loans with higher interest.

Qualifying for a Low-Interest Personal Loan

What to do to get a low interest personal loanEvery lender will have different requirements as to how to qualify for a low-interest loan. That is why it is better to shop around, even if you already have good credit. Generally, you will need to have good credit and enough steady income that the lender is reasonably able to believe that you will be able to pay back the loan. Different lenders may look at some factors more favorably, such as a long history paying credit card bills on time.

If you do not currently qualify for a low-interest loan, there are things you can do that will help your position. For instance, you can pay off some of your existing debt in order to change your debt to income ratio. You can also simply wait for several months and make sure you pay everything on time so that you can prove you are reliable. Getting a higher paying job or a second source of steady income will also help. If you have a friend or relative who wants to back you, you can better your chances by getting a co-signer. Your co-signer must have a good enough credit score and income level so that he or she would qualify for a low-interest personal loan.

Reasons to Use a Personal Loan

It seems like there are as many reasons to use a personal loan as there are people taking out personal loans. A personal loan can solve a lot of problems in a short amount of time, but many people don’t realize they can take out a loan for certain situations. They also might not understand how easy it can be to get the right personal loan for their circumstances. Here are some important reasons individuals take out personal loans:

  1. Losing your home is one of the worst disasters that can happen to you. Sometimes, though, one thing happens after another and you get an eviction notice on your door because you didn’t pay your rent. You can take out an emergency loan to pay rent so that you can catch up payments with your landlord and stay in your home.
  2. When people don’t have insurance, or if the insurance doesn’t pay out fast enough, you may need a loan for funeral expenses.
  3. If you have an accident and do not have an emergency fund in place, you may need a personal medical loan to help you get back on your feet.
  4. If you find yourself in a situation where you need a lawyer, for instance, if you are trying to receive disability compensation for a work-related incident or are seeking assistance with a divorce or child custody issue, and do not have enough money for representation, you could use a legal loan to cover your legal fees.

However, it is always important to remember one of the main rules of taking out any loan, which is that you shouldn’t take out a loan that you can’t reasonably payback.

Some of the Reasons the Solar Institute Gives for Going Solar

There are many good reasons why you should install solar panels. And if you are thinking about going solar, maybe these few reasons below will help you in your decision.

Lower Electric Bills

You might not be able to eliminate your energy bill entirely, but you can cut down on your monthly bills a lot. Your monthly energy bill is probably your biggest monthly expense besides your rent or mortgage payment, and saving money every month will add up to big savings down the road.

Increased Property Value

When you decide to sell your home, a property where the owner is already taking advantage of solar power will attract potential buyers. You will also be able to show off how much you’ve been saving every month on your energy bills. When you show your neighbors how much money you’re saving, they might follow your lead, raising the value of the homes in your neighborhood.

Save planet - go greenGoing Green

Solar energy doesn’t emit waste, so it’s better for the environment. Reducing your carbon footprint is just the right thing to do, and using solar energy helps you do that. You can feel confident every day that you are doing your part to help the environment.

Tax Incentives

Who doesn’t want to save money on taxes? If you are considering taking advantage of this tax incentive, called the Investment Tax Credit (ITC), then you should try to take advantage sooner rather than later. In 2020, you will be able to deduct up to 26% of the cost of your new solar panel system from your taxes, but by 2021, you will only be able to deduct up to 22%. From 2022 onwards, you will only be able to deduct up to 10% of the cost of your solar power system. This is still a great incentive, but to get the most bang for your buck, consider getting your solar panels as soon as possible.

Conclusion

Solar panels are good for the environment and good for your bank account, when you consider the savings from lower electric bills and possible tax incentives. If you cannot afford solar panels on your own, consider looking into solar panel loans. You can find solar panel loans online by online loan shopping for solar panel loans, or you can go to a bank to ask about solar panel loans. Before deciding which solar panel loans might be right for you, inform yourself of the different solar panel loan options.

Whatever you end up deciding, make sure you consider all of the solar panel loan options and compare all of the different rate options. Don’t forget that you will need to pay back solar panel loans, like other types of loans, so make sure that whatever solar panel loans you get, fit into your budget.