How to Navigate High Solar Interest Rates

How to Navigate High Solar Interest Rates

It’s been a rough few years for the economy, especially in a post-Covid-19 world. Inflation has been shooting up since the shortest recession on record—and, when costs go up, the Federal Reserve responds to drive them back down.

They do this by raising Federal Interest Rates, which, in theory, slows consumer spending and forces corporations to lower prices. During 2022 and 2023, interest rates were increased 11 different times, from 0.25% to 5.50%.

Even though they’ll statistically help in the long run, nobody likes high interest rates. They affect everyone and every market, but most directly those that often require loans (obviously).

Home sales, auto sales, and (you guessed it) solar sales all rely heavily on financing, because they usually have a large initial investment.

In this economic climate, though, inflation has caused energy costs to skyrocket as well. Solar is one of the most effective ways for consumers to save on energy, but the cost of living means most homeowners don’t have a lot of money to spend on a system (even worse, a system with a high interest rate).

As you can probably tell, this becomes quite the paradox. Luckily, there are a few ways to navigate these high interest rates and save money on solar AND energy. Keep reading to learn more:


Getting the best price possible

It may seem obvious, but a great way to save money on your solar system is to get a good price.

This isn’t always as easy as it sounds, especially with deceptive salespeople and many details to consider. Low costs can sometimes correlate with low-quality as well.

At Project Solar, we’re dedicated to providing the best investment we can, without any salespeople. Cutting out the sales reps also cuts out their commissions, providing a lower cost.

Our top-tier, reliable equipment and warranties further demonstrate our commitment to transparency and offering the best bang for your buck.

To save even more, handy homeowners can opt for DIY installation. While it may sound daunting at first, installing a solar system is relatively simple, and we’re there to help out through the process.

We also handle all the design, engineering, and permitting for your project--online. We have reps available to provide install support if you have any questions or concerns.

Financing options with less interest

At the end of the day, interest rates are what they are, even if you find a good price on solar. Solar loan rates can get even higher, depending on term length and other factors. There are some alternatives that can provide a lower rate, though:

-Your own personal bank/credit union
Sometimes, your own bank or credit union will offer a better financing rate than can be found elsewhere, particularly if you have good credit or a good relationship with the bank. When shopping around for solar, make sure to check with them to see what they have available.

-Paying with a large down payment/cash
Obviously, not everyone has the money to purchase a solar system outright or make a large down payment. However, if you can, the ROI and savings are vastly better. Interest adds up, and the more you can avoid it, the quicker your system will pay itself off.

-Home equity options
A Home Equity Line of Credit (HELOC) gives you the option to add a line of credit for large purchases. As these aren't a traditional loan, they normally come with a much lower interest rate than standard. The only downside with these options is that rates can change with the market, making payments less predictable. When considering a HELOC, you should take into account market conditions and how the Federal Reserve expects interest rates to adjust in the near future. For example: rates have been projected to start declining in the next few years, so a HELOC may be a good option at the moment.

Power Purchase Agreements

A very popular option in the solar industry right now is a Power Purchase Agreement (PPA). Dishonest sales reps have given it a bad name in the past, but at this point in time it can be a very cost-effective option when done correctly.

PPAs are more of a lease, where you pay for the power that your system produces at a much discounted rate, rather than the equipment itself. This means that the solar company owns the system, completely removing any upfront cost for the customer.

Because there's no upfront cost, PPAs are an amazing alternative for customers who can't afford a solar system. The only thing that can make PPAs difficult is that they vary from company to company, and some companies may have more advantageous rates and features than others.

To account for inflation, some providers even charge an annual escalator, which increases the cost per kWh yearly.

At Project Solar, we've launched a PPA without any annual escalators, meaning you can lock in your electricity costs at a low price for 25 years. As utility prices rise, you can enjoy a steady rate.

Plus, our PPA comes with a comprehensive warranty for the entire 25-year agreement term, meaning you won't have to worry about any maintenance or upkeep for the system.

What's the best choice for me?

If you have savings to spend, purchasing a system outright can be a worthwhile option to avoid interest entirely: it provides a home value increase, and you can claim the Federal Solar Tax Credit (ITC) for 30% of your system’s cost. Installing your system DIY is another way to reduce upfront cost. 

For financing, using your own bank and/or utilizing Home Equity options can help you reduce interest. 

For the lowest cost option, a PPA is the way to go: no upfront cost, no interest, and no maintenance. 

You can also use a Project Solar PPA as a lease-to-own system. Anytime after year 5 of your agreement, you can refinance to purchase your system–this is a perfect way to avoid current high interest rates and take advantage of the market when things improve down the road. 

Whether you’re purchasing your system, financing your system, or entering into a PPA, you won’t find a better deal than Project Solar. Get started now! 

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