Solar Financing Calculator
Compare the monthly loan payment and total interest cost of financing a solar installation versus paying cash. Ideal for homeowners evaluating solar loan offers before signing.
About this calculator
When financing solar with a loan, your monthly payment is calculated using the standard amortization formula: M = P × r(1+r)ⁿ / ((1+r)ⁿ − 1), where P is the principal (systemCost − downPayment), r is the monthly interest rate (loanRate / 100 / 12), and n is the total number of payments (loanTerm × 12). The federal tax credit reduces your effective system cost — typically 30% under the current ITC — which can be applied as a lump-sum payment against the principal in year one. Total interest paid equals (M × n) − P. Comparing this total cost against the cash purchase price (minus the tax credit) reveals the true premium for financing.
How to use
System cost: $20,000. Down payment: $2,000. Loan rate: 6.99% APR. Loan term: 10 years. Principal P = $20,000 − $2,000 = $18,000. Monthly rate r = 6.99/100/12 = 0.005825. n = 120 payments. M = 18,000 × 0.005825 × (1.005825)^120 / ((1.005825)^120 − 1). (1.005825)^120 ≈ 2.0007. M ≈ 18,000 × 0.005825 × 2.0007 / 1.0007 ≈ $209/month. Total paid = $209 × 120 = $25,080. Total interest = $25,080 − $18,000 = $7,080.
Frequently asked questions
How does the federal solar tax credit reduce my loan financing cost?
The federal Investment Tax Credit (ITC) allows you to deduct 30% of your solar system cost from your federal income taxes in the year of installation. If your system costs $20,000, the credit is $6,000, reducing your net cost to $14,000. Many solar lenders recommend applying this credit as a balloon payment against the loan principal in year one, which substantially reduces total interest paid. You must have sufficient federal tax liability to use the full credit; unused portions can sometimes be carried forward to the next tax year.
What interest rate should I expect on a solar loan in 2024?
Solar loan rates in 2024 typically range from 5% to 12% APR depending on your credit score, loan term, and lender type. Credit unions and community banks often offer the most competitive rates for established customers. Specialized green energy lenders like Mosaic or Dividend Finance offer rates around 5–8% for borrowers with good credit. Dealer-fee loans — common when arranged through solar installers — may carry higher effective rates despite appearing low, because the installer pays a fee that is baked into the system price.
Is it better to pay cash or finance a solar system?
Paying cash minimizes total cost and maximizes return on investment since you avoid all interest charges. However, financing preserves liquidity and can still be financially sound if the monthly loan payment is less than your current electricity bill. A useful rule of thumb is that if your loan payment is lower than your monthly electricity savings, financing is cash-flow positive from day one. The 30% federal tax credit, when applied to principal, significantly shortens the effective payback period regardless of financing method.