i am your guide to solar finance

Personal loan (unsecured)

Unsecured personal loan products can vary with some having fixed interest rates and repayment amounts, while others have flexible repayments and variable interest rates. The term of a loan is usually five to seven years, but could be up to 15. 

Also known as a solar loan, unsecured personal loan or solar finance

Finance details

Period Interest Rate Early repayment possible
1 - 15 years 12 - 18% Sometimes

Ownership of the solar system

You own the solar system.

Financing costs, fees and charges

  • Fixed or variable rate of interest.
  • Potential establishment and administration fees.
  • Potential 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

  • Spreading the costs of the system over a longer period through smaller repayment amounts.
  • Repayment amounts can be covered by energy bill savings during the term of the loan, so you save money.

Disadvantages

  • A longer contract period means paying more in interest and fees over the life of the loan.
  • Higher interest rates than a secured loan. 

Managing risks

  • You are responsible for making sure the system produces as much energy as you expect and that you use it. Visit Get the benefits you need for tips on getting the most out of your solar PV system.
  • Some payment plans 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 an unsecured personal 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 costs of any finance 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

5 years at 16.90% interest rate, $150 establishment fee and $165 annual loan servicing fees

Comparison interest rate

21%

Costs and bill savings

Total payments

$13,200

Total bill savings

$20,600

Net savings

$7,400

 

Effective interest rate

21%

Lifetime unit cost of energy

0.19 $/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.

Unsecured loan purchae of 3kW system for household at home during work days

The chart shows that the upfront costs are spread over the first five years, and that these costs are always significantly greater than the energy bills savings. The system delivers net savings of nearly $1000 per year for the remaining 20 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