Can You Use a Home Improvement Loan to Install Solar Panels?
Solar panels have become more and more popular over the years. While they offer many benefits, they’re quite expensive. In fact, the average cost of a residential solar power system ranges from $3,500 and $16,000. The price you pay will depend on factors like your location, the size of the system, and the type of panels you choose.
There might also be additional costs for inverters, metering equipment, cables, and wires. Fortunately, you can use a home improvement loan to pay for a portion of or all of your solar panels.
Why Use a Home Improvement Loan
Put simply; a home improvement loan is a personal loan designed for home improvement projects, like solar panels. Once you take one out, you’ll receive a lump sum of money upfront. Then, you’ll repay what you borrow plus interest over an agreed-upon period of time, which may range from a few months to several years or longer.
Since most home improvement loans are unsecured, you don’t need to back them to collateral, which is a valuable asset you own, like your house or car. You can also prequalify online and check your loan offers without any impact to your credit.
Benefits of Solar Panels
While there are many benefits to installing solar panels, the most noteworthy ones include the following:
Reduce Energy Costs
By installing solar panels, you can lower your electricity bills. Here’s how: Solar panels produce electricity which goes back into the grid. Your utility company will subtract the electricity you put into the grid from what you actually used. Depending on how much electricity you put into the grid, you can reduce your energy costs significantly or even enjoy no-cost electricity.
Generate Income
While solar panels cost money, they can also earn you money. If the sun is out, for example, you might be able to produce more electric power than your house requires. In this case, you can reach out to local utility companies and potentially sell your electricity. This is a great way to supplement your income.
Increase Property Value
Many home improvement projects can boost your property value, and solar panels are one of them. Studies show that your home value goes up for every $1 you save in electricity bills. Whether you hope to sell your home in the future or plan to stay in it for quite some time, you will benefit from a higher property value.
Protect the Environment
Solar panels don’t require oil, coal, or other fossil fuels, allowing you to reduce your carbon footprint. Solar panels are a great option if you’re looking for a way to make your home more energy efficient. They’ll allow you to protect the planet and your pocketbook at the same time.
Other Ways to Finance Solar Panels
If you believe a home improvement loan isn’t right for your solar panel project, consider these alternatives.
- Home Equity Loans and Home Equity Lines of Credit (HELOCs): If you have sufficient equity in your home (the difference between what you owe on your mortgage and what your home is worth), home equity financing is worth exploring. You can land a low-interest rate and a lengthy repayment period.
- Contractor Financing: Some contractors will let you finance your solar panels through a third-party lender. Interest rates are usually low, and your typical terms range from 10 to 25 years.
- FHA 203(k) Loans: With an FHA 203(k) loan, you can combine the cost of your solar panel project into your new or refinanced mortgage. Keep in mind that a contractor will have to install your system if you go this route.
The Bottom Line
If you’re in the market for solar panels, a home improvement loan can be a smart idea. This is particularly true if you shop around, prequalify for multiple loans, and choose the most affordable one for your unique situation.
Notice: Information provided in this article is for information purposes only and does not necessarily reflect the views of ahouseinthehills.com or its employees. Please be sure to consult your financial advisor about your financial circumstances and options. This site may receive compensation from advertisers for links to third-party websites.
