Solar Loan Payment Calculator
Determine your fixed monthly payment for a solar loan and see how the federal tax credit and monthly electricity savings affect your true net cost. Use it when comparing financing options before signing a solar contract.
About this calculator
Solar loans use the standard amortizing loan formula, where each monthly payment covers both interest and a portion of principal so the balance reaches zero at the end of the term. The monthly payment formula is: M = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments (years × 12). A federal investment tax credit (ITC) — currently 30% for residential systems — reduces your effective loan principal if you apply the credit to the balance in year one, which many solar lenders structure explicitly. Monthly electricity savings work against the payment to show your true out-of-pocket cash flow: if your payment is $180 but you save $120 on electricity, your net monthly cost is only $60.
How to use
Loan amount: $20,000; annual interest rate: 6.99%; term: 10 years. Step 1 — monthly rate r = 6.99% ÷ 12 ÷ 100 = 0.005825. Step 2 — n = 10 × 12 = 120 payments. Step 3 — M = 20,000 × [0.005825 × (1.005825)^120] / [(1.005825)^120 − 1]. (1.005825)^120 ≈ 2.0022. M = 20,000 × [0.005825 × 2.0022] / [2.0022 − 1] = 20,000 × 0.011663 / 1.0022 ≈ $232.64/month. With a 30% ITC ($6,000 applied to principal) and $130 monthly electricity savings, your effective net monthly cost ≈ $232.64 − $130 = $102.64 after savings.
Frequently asked questions
How does the federal solar tax credit reduce my loan payments?
The federal Investment Tax Credit (ITC) gives you a 30% credit on the total installed cost of your solar system, applied directly against your federal income tax liability for that year. Many solar lenders design their loans so that if you apply the ITC to reduce the principal balance within 12–18 months, your monthly payment recalculates downward for the remaining term. If you don't apply the credit to the loan, you still receive the tax benefit but your monthly payment stays the same and you pocket the cash separately. Either way, the ITC significantly lowers the effective cost of solar financing and is one of the most important numbers to factor into any solar purchase decision.
What is a good interest rate for a solar loan in 2024?
Solar-specific loans from green lenders like Mosaic, Sunlight Financial, or GreenSky typically range from 4.99% to 9.99% APR for borrowers with good credit (700+), with terms from 5 to 25 years. Shorter terms carry lower rates but higher monthly payments, while longer terms lower the payment but significantly increase total interest paid. Home equity loans or HELOCs can offer rates of 7–9% with the added benefit of potential tax deductibility of interest. Personal unsecured loans for solar often carry higher rates (8–15%) and shorter terms. Always compare the total cost of financing, not just the monthly payment, and check whether the loan has a dealer fee built into the principal that inflates your borrowed amount.
Is it better to pay cash or finance a solar system with a loan?
Paying cash typically delivers the highest long-term return because you avoid all interest charges and immediately earn the full value of your electricity savings from day one. However, financing with a low-rate solar loan allows you to install a system with little or no money down, and if your monthly electricity savings exceed the loan payment, the system is cash-flow positive immediately. The break-even comparison hinges on the loan interest rate versus what you could earn investing that cash elsewhere. At loan rates below 6%, financing is often competitive with cash purchase. At rates above 8–9%, the total interest cost over a 15–20 year term can equal 30–50% of the original system cost, making cash or a shorter loan term more attractive.