Should You Take Out a Solar Energy Loan?

Accumulate more debt? The idea seems ludicrous these days, when everyone from President Obama to Rush Limbaugh admit that it will get worse before it gets better. Yet, in a somewhat ironic twist, as the economy continues to plunge, solar power options continue to look rosier — perhaps symbolic of renewable energy’s savings potential.

This increased rosiness stems from the spread in popularity of solar home loans. These loans help homeowners bypass solar power’s number one obstacle: up-front costs. Even after generous state and federal rebates, incentives which can cut the price nearly in half, a big number of families still cannot afford a price tag of $15,000 to $20,000 (even when compared to $40,000).

But now these loan opportunities are popping up. In addition to financing from solar companies themselves, some states are creating loan options as well. The state of Oregon’s Small-Scale Energy Loan program has already handed out over 800 loans, equaling more than $420 million. California and New York, among others, also have state-funded loan programs.

Yet how smart is any kind of loan in today’s economic climate? How do you sign the dotted line when job insecurity is at record highs? The answer to that question is not an easy one.

Solar home loans are somewhat unique in nature. First of all, they help overcome the high cost of purchase and installation. Secondly, the product you purchased will actually save money from month to month, thus offsetting at least a portion of the monthly loan payment.

With relatively low interest rates factored in as well, the temptation gets stronger. Now is as good a time as any to embrace solar, while financing and incentive options are as good as they’ll ever be.

Still, it is difficult to give an all encompassing recommendation to take out a solar home loan. Times are tough — there’s no getting round it — each and every family must decide for themselves what they can handle.

Yet the numbers make sense. Consider the slew of available rebates, tax credits, and other incentives, and the relatively short payback periods they produce. When you factor in all these benefits, from direct rebates to the increase in assessed home value (often exempt from local property taxes) as a result of installing a solar system, a payment on a solar loan does not seem so much like an extra and unnecessary burden.

Nonetheless it is a loan, and must be paid back. Entering into any loan, state-funded or not, without the confidence that you’ll be able to pay it back, is never a good idea. However, there seems to be little catch in the available state loan programs. Some business leaders are unhappy that governments are entering the financing market but, quite frankly, I’m not taking free market ideologies too seriously at the moment.

In fact a state-insured loan makes the deal even sweeter on a broader scale. These loans will spur more growth, benefitting the solar industry and local economies. Solar jobs are high-wage, green collar jobs — just what we need right now. Affordable solar loans will play a part in creating these jobs and get money flowing again.

Posted on February 11th in Going Solar by Dan.