i am your guide to solar finance

Loan (secured)

The secured loan option means you pay nothing upfront for the system. You pay the system off over the term of the loan, usually five to seven years, at either fixed or variable interest rates.

While you pay nothing up front for the solar system there are potentially other upfront costs for the finance and installation. As the loan is secured against the panels, this may give the lender the right to reclaim and/or disconnect the system if you don’t make payments.

Also known as a secured personal loan, solar finance, solar loan or green loan

 

Finance details

Period Interest Rate Early repayment possible
1 - 15 years 7 - 14% sometimes

Ownership of the solar system

You own the solar system.

Financing costs, fees and charges

  • Interest at a fixed or variable rate.
  • Establishment and monthly service fees generally apply.
  • Potentially early repayment charges and/or exit fees. 

Performance and maintenance costs

You are responsible for monitoring system performance and the costs of any out-of-warranty maintenance required, such as inverter replacement.

 

Advantages

  • Small repayment amounts because they are spread over a long period.
  • Usually repayments are less than energy bill savings during the term of the loan, so you save money.

 

Disadvantages

  • A long contract period mean paying more in interest and fees over the life of the loan.

Managing risks

  • You are responsible for making sure the system produces as much energy as you expect and that you use it.
  • Some loans penalise you for paying the loan off earlier. Make sure the early repayment and exit terms and conditions suit your likely future circumstances.

Example

Below is an illustration of how the costs and bill savings could work for a secured loan.

In practice these costs and bill savings will vary depending on what you pay for the system, how much energy it produces, how much energy you use, and the period and the costs of financing any payment plans. 

Scenario

Solar project

 

Solar system size (kW)

3kW

Upfront system cost ($ net STC subsidy)

$5,200

Proportion of power used (%)

67%

Life of system

25 years

Maintenance costs

(Assume a new inverter is required every 10 years)

$4,300

Cost of daytime grid electricity

$0.20 to $0.51 / kWh

Payment conditions

Deposit/initial payment

$0

Term of finance

7 years at 6.12% interest rate, $150 establishment fee and $120 annual loan servicing fees

Comparison interest rate

11%

Costs and bill savings

Total payments

$12,200

Total bill savings

$20,600

Net savings

$8,400

 

Effective interest rate

11%

Lifetime unit cost of energy

0.16 $/kWh

The chart below illustrates the annual cash flow of energy bill savings and the costs of the solar system and finance based on this scenario.

Cashflow analysis of secured loan purchase of 3kW system for household at home during work days

The chart shows that the upfront costs are spread over the first seven years, and that the costs are always slightly greater than the energy bill savings. The system delivers net savings of nearly $1000 per year for the remaining 18 years, apart from years 10 and 20, when the scenario assumes that the inverter needs replacing.

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Page last updated: 18 December 2015