Are you considering installing solar panels but worried about the upfront costs? If yes, then solar loans are one of the most popular ways of financing solar panels. There are two types of loans given out one is secured and the other is an unsecured solar loan. In this blog, we’ll discuss unsecured solar loans in detail and also see secured vs. unsecured solar loans comparison.

Unsecured Solar Loan: Empowering Homeowners to Go Green

As mentioned above there are two types of solar loans, secured and unsecured. The name should somewhat give away what either means but if it doesn’t then we will.

A secured solar loan is a loan that is given out, especially for the reason of being used only for funding solar systems for your home or office. Also, these loans are backed by your property, that is, your home becomes collateral. If you default on payments then your house can be sold to recover the loan amount.

You should get a secured solar loan if-

  • Your credit history is poor or your credit score is low.
  • You want to get a large solar panel system.
  • You want to pay a low-interest rate on the system.

An unsecured solar loan is a loan that is given away without asking for your house or any other asset as collateral. These loans can be used for other purposes and come with a higher rate of interest because they are less safe/ more risky.

Get an unsecured loan if-

  • You have a good credit score and/or enjoy a strong financial position.
  • You don’t want to risk including collateral in the deal.
  • You want to get a solar system immediately.

Secured Vs. Unsecured Solar Loans

Now that we know about secured and unsecured loans it is time to compare secured vs. unsecured solar loans to find out which is the better option among the two.

ParametersSecured LoanUnsecured Loan
Interest RateThese loans are safe to give and so the interest rate charged is comparatively lower.These loans are riskier and so high-interest rates are charged for them.
Repayment PeriodLonger repayment periodsComparatively shorter repayment period.
Down PaymentLow or no down payment is required. Can pay a big chunk up-front if you wish to.Low or no down payment is required. Can pay a big chunk up-front if you wish to.
FeesDifferent types of fees are involved.Different types of fees are involved.
CollateralCollateral is needed, the house is the asset that mostly is considered.No collateral is required.
Credit ScoreCredit score comes into the picture, the higher the score the lower the interest rate.A credit score does not have a big part to play here.

Also Read: Solar Lease Vs Solar Loan: What Should You Opt For?

Pros of Secured Loans

  • The interest rate on these loans is less and so you end up saving some money.
  • The interest paid on these loans is usually tax deductible.
  • The requirements to be eligible for this loan are not that strict.
  • The loan amount is comparatively bigger since a collateral-backed loan is being given.
  • These types of loans help you build your credit score.

Cons of Secured Loans

  • It is hard to get these loans. Requirements such as good credit score, acceptable debt-to-income ratio, etc. are required.
  • The application process itself might take up to several days.
  • In case you default on your payments your asset can be sold to recover the loan amount since it was collateral in this transaction.

Pros of Unsecured Loans

  • There is no need to sign up any asset of yours as collateral.
  • These types of loans can be approved in a matter of minutes.
  • These loans are flexible and need not be compulsorily used on solar panels only.
  • The qualification for these loans is easier but because of it if you get a loan but can’t repay it then your credit score drops.
  • The loan obtained can only be used for the specific purpose of buying solar panels.

Cons of Unsecured Loans

  • The interest rate payable on these loans is generally higher.
  • Interest paid on these loans is not tax deductible.
  • The loan is risky and so the checking is tighter and a good financial position might be needed to be considered for these loans.
  • There are hidden fees that come with such loans to compensate for the high risk.
  • Since the loan is riskier to give the amount given away is comparatively smaller.

Also Read: 4 Leasing Solar Panels Pros and Cons

Unsecured Solar Loan Rates

An unsecured solar loan has a lot of pros as well as cons when compared to secured loans, however, they are not all that bad. Some people can’t get a secured loan as they might not be able to meet the eligibility requirements or for other reasons and so those people can opt for the former.

Unsecured solar loan rates vary from 4% to 20%. Various factors come together to determine how much interest rate will be charged to a customer. The loan repayment period for such loans is between 2 and 25 years. These loans come with a lot of hidden fees and so you have the option of making a bigger payment upfront to have smaller installments to pay later on or you can continue to make monthly payments for a longer time.

9 Residential Solar Loans

We have learned all there is to learn about a secured solar loan and an unsecured solar loan. However, we aren’t don’t just yet. Before we wrap up this article we have a few solar loan plans to share with you so that you can choose the best from the best for yourself.

1. SoFi

JAN 23 Unsecured Solar Loan Empowering Homeowners to Go Green
Image from sofi.com

If you have a good or excellent credit score then you should consider a SoFi personal loan. Their loan can be managed from a mobile app. The loan comes with a hardship program that can help you out in times of need. There is no late fee on their loan and the duration of payback ranges between 2 to 7 years. The rate of interest may range between 8.99% and 23.43%. You can get a loan of between 5,000 and 100,000 dollars. To get this loan you must be based in the US and be an adult.

Also See: Leasing Solar Panels vs Buying: What is Better?

2. Lightstream

JAN 23 residential solar loans
Image from lightstream.com

People with strong credit can check out loans by LightStream. They don’t charge you any fees and also their interest rates are low. They offer longer repayment terms for home improvement loans. The company offers a rate beat program that brings down the rate of interest they plan to charge you. However, the credit score requirement for this loan is 660 at least. You also need to have several years of credit history and need to meet quite a few other requirements to be eligible for a loan. The repayment terms are between 3 and 7 years. Also, no late fee or origination fee is charged for the same.

3. PenFed Credit Union

JAN 23 Unsecured Solar Loan Empowering Homeowners to Go Green
Image from penfed

PenFed Credit Union offers a range of terms and loan options to people with good/excellent credit scores. You can pre-qualify for their loan via a soft credit score. They give away loans within a week and you can also opt for a co-sign or joint loan option. There are quite a few eligibility requirements to meet for getting their loans such as having a credit score of over 700, an annual income of over 55,000 dollars, and debt to income ratio of at least 40% among others. The loan term ranges between 2 to 5 years. There are no orientation fees but there is a late fee of 29 dollars and a non-sufficient fee of 35 dollars.

4. Best Egg

JAN 23 residential solar loans
Image from bestegg.com

If you are looking for residential solar loans then your search can end with Best Egg. If you need money fast then they are who you go to. They offer a wide range of loans which include secured loans for homeowners. You need to have a credit score of 600 to 700 to be eligible for their loans. The loan term is between 3 to 5 years and there is a 15-dollar return fee and origination fee ranging between 0.99% and 8.99%. They give away loans ranking between 2,000 and 50,000 dollars.

Also Read: 13 Best Commercial Solar Financing Companies

5. Upgrade

JAN 23 residential solar loans
Image from upgrade.com

Upgrade’s loan can be used as an unsecured solar loan. Their loan can help you build your credit, however, to be eligible for their loans you need strong cash flow. They offer secure as well as joint loans and also offer multiple discounts. You can manage the loan via an app and there are long repayment terms available for home improvement loans. You need to have a credit score of at least 560. Their loan repayment term ranges between 2 to 7 years. There is an origination fee of between 1.85 and 9.99% and there is a 10-dollar penalty for late and failed payments.

6. LendingClub

JAN 23 residential solar loans
Image from lendingclub.com

People with fair to good credit scores can opt for the services of LendingClub. They provide a joint loan option and also provide you the option to pre-qualify with a soft credit check. Some eligibility requirements of theirs are having a credit score of 600 and a debt-to-income ratio of 60% for single persons and 40% for joint applicants. Their loan repayment term is between 3 to 5 years. They have an origination fee of 3 to 6% and a late fee of 5% of payment or 15 dollars. They give away loans between 1,000 and 40,000 dollars.

7. Alliant

JAN 23 Unsecured Solar Loan Empowering Homeowners to Go Green
Image from alliantcreditunion.org

If you are looking for a wide range of loan options that are given away quickly and have a decent rate attached to them then Alliant is your go-to financer. Their minimum credit score requirement is 620 and you also need to be their member for at least 6 months before applying for the loan. Their loan repayment terms range between 1 to 5 years. They don’t have any sort of origination fee or prepayment fees, however, they do have a varying late fee.

Also Read: What is Meant by Solar Loan Calculator?

8. Sungage Financial

JAN 23 residential solar loans
Image from sungage.com

If you need a big amount as a loan to finance your entire solar panel system then Sungage Financial is an option you should consider taking a loan from. They give loans of up to 150,000 dollars and their loan repayments terms can be as long as 25 years. They fund the whole project and can also cover roof work and battery storage costs. Their loan approvals are fast and they do only a soft credit check. They don’t have any sort of prepayment fees. However, their requirements mean you need to have a credit score of at least 640 and your debt-to-income ratio can’t be above 50%.

9. Upstart

JAN 23 upstart
Image from upstart.com

If you have a very thin credit score which is as low as 300 then you can turn to Upstart for funding your solar panels. Their loan can be used to renovate or repair the home as well. Since the loan is unsecured there is also no collateral to be placed against the loan. There are no prepayment fees but there is a late fee. They do a soft credit check and charge an origination fee of up to 10%. They gave away loans between 1,000 and 50,000 dollars ranging for a period between 3 to 5 years. Their loan APR ranges from around 6.12 to 35.99%.

With that, we have covered everything there is to know about an unsecured solar loan. Both secured loans and unsecured loans have pros and cons but in the end, your choice needs to be based on what feels better for you. Ideally, a secured loan is slightly better as far as we are concerned, which is reiterated after looking at unsecured solar loan rates. However, it is better to check out the residential solar loans that are available to you and compare the terms before you proceed with either option.

Recommended: Is Off-Grid Solar Legal in California?

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Olivia is committed to green energy and works to help ensure our planet's long-term habitability. She takes part in environmental conservation by recycling and avoiding single-use plastic.

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