Homeowners Guide to Solar Financing
On average, the average person in Australia pays around $1,800 for their electrical bill each year.
The cost does vary depending on the region – In Perth, for example, you could expect to pay about $1,800, while in Victoria, your bill might be $1,300.
You might already know that solar panels can save you plenty of money on your yearly power bill.
What you might not know is how you can purchase them. We won’t lie; solar panels can cost as much as $11,000 (for a large system), which isn’t exactly pocket change for the average person.
If you’re concerned about how much you spend on your electric bill each year, it makes sense that paying over $6000 to keep your home running seems like too much.
There is a way to reduce your potential costs, though – solar finance. Solar finance or rebates can significantly reduce the amount you’ll pay for your solar panels.
This article is a handy guide all about solar panel rebates. We’re going to discuss what solar finance is and what options you can choose from.
What is Solar Finance?
Solar financing is assistance that homeowners can get to help them pay for their solar panels. Solar energy is, on the whole better for your pockets and the environment.
At first glance, however, solar cells probably don’t seem that great for your wallet. But solar financing can help lift some of the costly burdens.
Think about this. You have the perfect found solar panels you want to install onto your house – the only problem is that they’re going to cost $7000.
That’s not exactly cheap, so your best bet is to harness solar energy on credit. You’re going to need financing to help you pay for your panels to avoid going into debt.
There are various types of solar financing available to Australian homeowners, and which one best suits you depends on your circumstances.
Types of Solar Financing
It’s taken us a bit of time, but we’ve gotten to where we can discuss other kinds of solar financing. There are five ways that homeowners typically fund their solar panel purchase:
- Adding to home mortgages
- Renting to own or solar leasing
- Green loans
- Interest-free solar loans
Some financing choices may not appeal to some of you for various reasons. Maybe some readers probably don’t qualify for a certain kind of finance. Perhaps you would prefer using cash over a green loan.
Regardless, hopefully, everyone looking to add solar panels to their home can be accommodated with at least one form of financing mentioned here.
Add Solar Panel Costs to Your Home Mortgage
A homeowner can add more to your current home loan so that you can afford your solar panels. Mortgage redraws have the added benefits of low interest compared to other methods and less loan start-up fees.
If you’ve still got a ways to go on your mortgage but are trying to pay it off quickly, this kind of financing is a good option for you.
Mortgage redraws are best suited for people looking to pay their loans as fast as possible is because they’re likely to make larger payments.
Sticking to minimum payments draws out the time you have to pay off your mortgage and double your solar panels’ costs, thanks to interest.
Talk to your current home lender if you can and are willing to pay off your loan as fast as possible. They can instruct you on how to apply for a mortgage redraw.
One other thing you should consider is how much your mortgage is compared to a shorter-term solar loan. If you can pay off the solar loan quicker and cheaper, you should probably choose this option.
You may also have to contend with variation fees for the change on your mortgage or an application fee to submit the change request. These fees can influence your mortgage lender’s insurance.
Rent to Own Solar Panels
Technically, you don’t own “your” solar panels until you’ve entirely paid off the entirety of the lease’s teams.
You will make the payments every month at a fixed rate with interest locked into the fee.
In exchange, though, you don’t have to maintain the solar panels yourself. The leasing company will handle any repairs and replacements for you.
Usually, people who can’t afford their solar cells’ upfront cost take this option, although loans tend to be cheaper.
Leasing panels eliminate your chance to take advantage of tax benefits offered with loans and incentives as well.
You can’t transfer the loan if you decide to sell your home to someone else. You’ll be stuck with an outstanding balance without any of the perks.
Leasing solar panels may seem like a good deal at first, but you have to watch out for the interest fees. You’re not paying the price first advertised for the system – you’re paying extra.
The total cost is the price for the solar cells and the accrued interest throughout your lease.
Renting solar panels may not be the best choice for most homeowners. Most smaller home system costs won’t justify the hassle for most people.
To many of you reading this, cash sounds like a terrible option. A lot of you are probably saying cash doesn’t count as finance, but that’s not true.
Financing is just providing money for what you need, in this case, a solar panel system. Using your nest egg is possibly the most straightforward and simplistic means of solar financing on this list.
Solar power pays for itself in the long run as it helps save plenty of money on your electrical bill and can add value to your home as well.
If you have spare money and are debt-free, there’s no harm in considering purchasing your solar panels outright.
Green loans are low-rate personal loans offered by specific financial institutions that want to fund environmentally friendly projects. You can get money for things like hybrid cars and solar cells for various establishments.
Obtaining a green loan isn’t almost the opposite of using the money you’ve saved. It takes a lot to apply for a green loan, and of course, you have to have a good credit score.
In general, green loans last for about five to seven years but have plenty of flex room depending on what you want to buy. You can repay the loan quicker if you’d like also.
You don’t suffer penalizations for beginning repayments early.
There are multiple green loans in Australia that you can borrow from to make energy-efficient, eco-friendly changes to your home.
Below is a rundown of three examples of where you can find green loans for solar panels and other green home technologies.Plenti
Plenti will lend you up to $50,000 with terms that last from three to seven years.
Whatever interest you pay depends on your credit history and annual income. Everyone’s interest rate starts at 6.99% p.a. (per year) regardless.
The better your credit history, the lower you can expect your interest rates to be. The comparison rate for Plenti green loans is 7.90% p.a.
The loan covers solar panels, solar water heaters and energy-efficient lighting. Brighte
Brighte will give you a maximum of $30,000 (or a minimum of $1000) for eco-friendly home remodelling.
Brighte loans are interest-free and come at a 5.89% p.a. fixed rate. The comparison rate is 6.67% p.a.
The loan’s terms last two to seven years, and there’s a $299 establishment fee. You’ll also have to pay either $6 each month or $1.50 a week for account maintenance fees. Australian Military Bank
Loans from the Australian Military Bank start as low as $4,000 and can reach as much as $40,000 with terms from one to seven years.
You can only use Australian Military Bank loans for eco-home renovations. No purchasing hybrid or electric vehicles is allowed. The loan interest rate is 4.15% p.a. and has a 5.09% comparison rate.
You’ll need to pay a $150 processing fee and a monthly maintenance fee of $10 for the account.
Interest-Free Solar Loans
Interest-free loans are very similar to green loans, except they don’t have added interest. These are unsecured loans, which means that they don’t require collateral.
Interest-free loans often have terms of a year, and you can make early payments without being penalized for it like green loans. Establishments Offering Interest-Free Solar Loans
If you’ve got bad credit, you should look into applying for a solar loan. However, you should know that these loans tend to have high fees and sometimes take up to 15 to 25% of the money provided.Handypay
Handypay’s solar loans are only for home renovation. You can get loans from $2,001 to $75,000 with rates that start from 6.75% p.a.
You may see different rates compared to other applicants depending on your credit score and financial history.
You won’t have to pay any fees aside from the establishment fee, about 1.5 to 6% of the loan amount. Humm
Humm loans don’t require hard credit checks and are interest-free. Humm loans are probably the best choice for people with bad credit and looking to purchase solar panels.
Homeowners can receive from $1 to $30,000, and the repayment program is flexible. You repay the loan weekly, biweekly, or monthly with no penalties for extra payments.
What is Buy Now, Pay Later?
For those of you that aren’t familiar with it, Buy Now, Pay Later is when you purchase something immediately and pay the costs off later in instalments.
Some companies that we’ve discussed, like Brighte and Humm, offer BNPLs. While these arrangements are helpful, you should know that there are risks that come with them.
Should You Use Buy Now, Pay Later?
If you can manage BNPL properly, then it’s not a bad deal. The problem, though, is that BNPL can be hard to keep track of.
Buy Now, Pay Later is a commitment that must be met when they’re due. You may miss paying other bills and loans to meet the BNPL payments and fees.
Yes, fees. Other fees sometimes come with Buy Now, Pay Later arrangements aside from the monthly or weekly payment.
You have late fees that can cost as much as $15 and establishment fees, essentially paying to set up the BNPL services. These establishment fees can cost up to $90.
One of the worst aspects of BNPL is that you may end up spending more money than you have. Overspending is endemic of Buy Now, Pay Later arrangements.
BNPL can also take 15 to 25% of your solar cell financing. So let’s say your solar panel set up is $10,000, and the BNPL arrangement will take 25% of the money.
That’s $2,500 you can’t use, and you only have $7,500 left.
That’s not to say you can’t purchase good quality solar panels with a little over seven grand, but often, the rule is that money you’ve got, the better products you can buy.
How to Manage Buy Now, Pay Later
There are ways to manage Buy Now, Pay Later arrangements.
The first step in managing a Buy Now, Pay Later is never to overextend yourself. Don’t have more than one BNPL at once.
It’s prudent to have a budget in place, too, set aside dedicated amounts for your other bills, loans, and other needs. It’s also possible to link your BNPL account to your debit card, so consider this instead of a credit card.
You can always talk to your BNPL service provider if you have issues keeping up with your payments. Financial counsellors are also an option to help keep track of expenditures.
Financial counsellors can help you get your money back in order; they can help you with any budgetary needs and teach you how to manage your funds.
Want to Know More About Solar Energy?
Purchasing solar panels can get expensive, but there are ways to reduce how much you’ll pay upfront.
You can apply for various green loans, lease a solar system or even pay hard cash if you prefer.
Be wary of Buy Now, Pay Later, though, as it’s easy to get lost amongst the repayments and other monthly household fees you have.
You must choose the kind of solar finance that best suits your needs.
If you want to know more about solar energy there’s plenty more on our blog you can read through.
Interested in solar? By clicking below you can use our smart solar calculator to find out just how much you could save with solar, what rebate you are eligible for, and the impact you will have on the environment.
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