Switching to solar power is a smart investment, but the upfront cost can be a hurdle. Because of this upfront investment, many people put off their plans to switch to renewable energy.
Luckily, there are multiple solar panel financing options available if you’re residing in the UK. You can choose to loan, lease, or pay in cash. Each option has its benefits. But to choose the right type of financing for your solar panel system, it is important to understand it.
Understanding the types of solar panel financing and their implications will help you find the best fit for your budget and long-term savings. In this guide, we’ll break down solar panel finance options including solar loans and government incentives. By the end, you can make an informed decision regarding the option that makes solar power affordable for your home.
Understanding the Cost of Solar Panel Installation
Before choosing a financing option, it’s important to understand the cost. The price of a solar panel system depends on its size, efficiency, and installation requirements. On average, a residential system costs between $10,000 and $30,000 before incentives. This includes solar panels, inverters, mounting hardware, and labor.
Additional costs may include battery storage, permits, and electrical upgrades. While the price may seem high, solar panels lower electricity bills and offer long-term savings. With the right financing, you can install a system with little to no upfront payment and start saving immediately.
Another cost with solar panels is the maintenance. If you live in the UK, solar panel maintenance is not a lot. Just regular cleaning throughout the year and a once-a-year checkup from your professional solar panel installers. So, the costs wouldn’t be much, but it is still important to factor in these costs to your solar panel system’s costs.
Solar Loans: Financing with Monthly Payments
A solar loan allows homeowners to install panels with no large upfront cost. Homeowners and commercial property owners can make monthly payments. This is similar to a car or home loan. Many banks, credit unions, and solar companies offer these loans with competitive interest rates. Some key benefits include:
- Ownership: You own the system and qualify for tax credits.
- Energy Savings: Monthly loan payments can be lower than your electricity bill.
- Flexible Terms: Loan lengths range from 5 to 25 years, with different interest rates.
One downside is that you’ll pay interest, increasing the total system cost over time. However, with low-interest options, a solar loan is one of the most popular ways to finance the installation.
Solar Leases and Power Purchase Agreements (PPAs)
If you don’t want to take out a loan, a solar lease or Power Purchase Agreement (PPA) might be a good alternative. With a lease, you pay a fixed monthly fee to use the solar system. In a PPA, you buy the electricity it produces at a lower rate than your utility. The benefits of these options include:
- No Upfront Cost: Installation is covered by the provider.
- Lower Energy Bills: Monthly payments are often less than your current bill.
- Maintenance Included: The provider takes care of repairs and servicing.
However, since you don’t own the system, you miss out on tax credits and long-term financial benefits. Leasing is great for those who want hassle-free solar with immediate savings.
Federal and State Solar Incentives & Tax Credits
Government incentives make solar energy more affordable. In the UK, several programs assist homeowners:
- Smart Export Guarantee (SEG): Energy suppliers pay you for surplus energy your system exports to the grid.
- Zero VAT on Solar Installations: As of 2025, domestic solar panel installations benefit from a 0% VAT rate, reducing costs by approximately £2,850 for the average 2-3 bedroom house.
- Warm Homes Plan: Starting in 2025, this initiative offers up to £15,000 for energy improvements and an additional £15,000 for low-carbon heating installations to eligible low-income households.
Before proceeding, research the incentives available in your area, as they can significantly lower both upfront and overall costs.
Home Equity Loans and Lines of Credit for Solar
Homeowners with equity in their property can use it to finance solar installation. Home equity loans and home equity lines of credit (HELOCs) offer low-interest borrowing options. Some home equity loans also have flexible payment plans and a monthly payment option to make renewable energy affordable for you. The main advantages are:
- Lower Interest Rates: These loans usually have better rates than personal loans, allowing you to reap benefits from your solar system sooner.
- Tax Deductibility: In some cases, the interest is tax-deductible. The tax benefits you get from this financing option, therefore, depend on your payback period.
- Lump Sum or Flexible Borrowing: Choose a fixed loan or draw funds as needed. However, your home is used as collateral, meaning you risk foreclosure if you can’t repay the loan. This option works best for homeowners confident in their ability to make payments.
Cash Purchase: Weighing the Pros and Cons
If you have enough savings, buying your solar system outright is the most cost-effective option. With a cash purchase, you avoid interest and own the system from day one. The benefits include:
- Maximum Savings: No loan payments and interest mean that the solar system costs less and you start profiting sooner compared to other options. If your panels are on the grid, you can start selling excess electricity immediately, allowing you to recoup your investment much quicker.
- No Credit Checks: Many financial institutions that offer loans for solar panels conduct a credit score check to ensure the person’s ability to make monthly repayments.
- Full Tax Benefits: You qualify for all available credits and incentives.
- Increased Home Value: Solar panels can raise your property’s worth since buyers can benefit from the panels and if on the grid, can sell back excess energy for a return.
The main drawback of a cash purchase is the high initial costs inclduing the cost of the system and the installation costs. So, if you don’t have the funds available, other financing options may be a better fit. But if you can afford it, paying in cash offers the highest return on investment.
Conclusion: Choosing the Best Financing Option
Financing solar panels doesn’t have to be complicated. Loans provide an affordable way to own your system, while leases offer low-cost, hassle-free solar. Government incentives reduce costs, and home equity loans offer low-interest financing.
Cash purchases maximize savings for those who can afford it since it allows owners to benefit from lowered energy bills and excess energy much sooner.
While each option has its own set of pros and cons, the right option for you depends on your budget, financial goals, and how long you plan to stay in your home.
Samso Renewables is not just an installation company. Its expert consultants can give you an accurate quote for your solar system by conducting a free assessment of your property. The accurate quote means that you can apply for a loan without any worry about the expenses going overboard.
These experts can also guide you on the available financing options for your system. We have local installers and consultants who have local knowledge. So, you might be in a small city like Winchester, Chichester, and Reigate or a large city like London, Samso Renewables’s experts got you covered.
