Solar Financing Options Compared: Cash, Loans, Leases, PPAs and PACE
The cheapest way to pay for solar is usually cash, and the cheapest way to borrow is usually a home equity line or a no-fee loan from a bank or credit union. The most expensive options are often the ones sold hardest: “low APR” solar loans with hidden dealer fees, and long leases or PPAs with yearly escalators. In 2026 the math has a twist: lease and PPA providers can still claim a 30% federal credit that homeowners who buy cannot, so some leases, especially prepaid ones, are priced well. Here is how each option works, what it really costs, and the risks.
The example system
To compare fairly, we use one system throughout: 8 kW at $3.00 per watt, a $24,000 cash price, installed in 2026 with no federal tax credit for an owned system. Loan payments are estimates using the rates shown.
Cash
How it works: you pay the installer directly, usually in stages.
Cost: $24,000. Nothing more, except the interest your savings could have earned.
Pros:
- Lowest total cost and the fastest payback.
- You own the system. Any state incentives go to you.
- Easiest when you sell the house.
Risks:
- Do not drain your emergency fund. Solar savings come slowly.
- Never pay most of the price before installation. Large upfront deposits are a risk if the installer goes out of business. See solar company out of business.
HELOC or home equity loan
How it works: you borrow against your home’s equity from a bank or credit union, then pay the installer cash.
Cost (as of October 14, 2026, Bankrate national averages):
- HELOC at 7.34%, paid off over 10 years: about $283 a month, about $33,900 total.
- 10-year home equity loan at 8.70%: about $300 a month, about $36,000 total.
Pros:
- You get the installer’s cash price, with no dealer fee.
- Rates are usually lower than unsecured loans.
- Interest may be tax-deductible in some cases if the loan is used to improve the home and you itemize. Ask a tax professional.
Risks:
- Your home is the collateral.
- HELOC rates are usually variable and can rise.
- Closing costs and appraisal fees may apply.
Solar loans (dealer-arranged)
How it works: the installer arranges a loan through a solar lender at the kitchen table. Advertised rates are often very low, from 0.99% to 3.99%.
The catch: dealer fees. The lender charges the installer a fee to buy down the rate, and the installer raises your price to cover it. The CFPB found these fees typically run 10% to 30% of the cash price, sometimes over 50%. LBNL found loan-financed systems cost a median of $4.50 per watt in 2025, about 50% more than the $3.00 cash median.
Cost example: a 25% dealer fee turns the $24,000 system into a $30,000 loan. At 3.99% over 20 years, that is about $182 a month and about $43,600 total.
The monthly payment looks lower than a HELOC’s, but only because the term is twice as long. You repay about $9,600 more overall. And if you sell or refinance, you owe the full $30,000 balance, including the fee.
Other traps:
- Re-amortization. Many solar loans assumed you would pay down about 30% (the old tax credit) around month 18. If you do not, the payment jumps. Owned systems installed in 2026 get no federal credit to fund that paydown. See re-amortization balloon.
- Payments that start before your system can run. See payments before PTO.
- Lender or installer bankruptcy. Mosaic, one of the largest solar lenders, went through Chapter 11 in 2025. Borrowers kept the same terms, but customers of failed installers can still owe on systems that are not fully supported.
Some solar loans are fine. No-fee or low-fee loans exist. SolarReviews reported unsecured no- or low-fee solar loans around 6% to 10% APR for borrowers with strong credit in 2026. The test is simple: if the financed price is higher than the cash price, there is a fee. See solar loan dealer fees and use our dealer fee calculator.
Personal or unsecured loans
How it works: a bank, credit union or online lender lends you money without using your home as collateral. You pay the installer cash.
Cost example: a no-fee unsecured loan at 8% over 10 years on $24,000 is about $291 a month and about $34,900 total. Many personal loans have shorter terms, often 5 to 7 years, which means higher payments but less interest. Rates depend heavily on your credit.
Pros: no lien on your home, and you get the cash price.
Risks: rates are usually higher than home equity. Some personal loans charge origination fees, which you should include in the total.
PACE financing
How it works: Property Assessed Clean Energy loans are repaid as an extra assessment on your property tax bill, often over 10 to 30 years.
Why we are cautious:
- The debt is attached to the property and usually takes priority over your mortgage. That can make refinancing or selling harder, because many mortgage lenders will not work with an outstanding PACE lien.
- Your property tax bill rises, and if your mortgage escrows taxes, your monthly payment jumps.
- It is often pitched as a “government program.” It is a loan. The FTC and California’s attorney general reached a $3 million settlement with PACE provider Ygrene over its practices.
- Rates and fees are often higher than home equity options.
Solar lease
How it works: a company installs and owns the system. You pay a monthly fee, usually for 20 to 25 years, and use the power.
The 2026 twist: the leasing company can claim a 30% federal credit under Section 48E (with deadlines and sourcing rules). That is why so many salespeople now offer leases. You benefit only if the company passes some of that credit on in a lower price. See the federal solar tax credit in 2026.
Cost example: a lease starting at $150 a month with a 2.9% yearly escalator reaches about $298 a month in year 25 and totals about $64,800 over the term. The same lease with no escalator totals $45,000.
Pros: no upfront cost, maintenance usually included, and possible production guarantees.
Risks:
- Escalators can push payments above what the utility would have charged. See solar escalator clauses.
- Selling the house: the buyer must qualify to take over the lease, or you may have to buy it out. See selling a house with solar.
- The provider may not last 25 years. Sunnova and PosiGen both filed for bankruptcy in 2025.
- No state incentives for you, since you do not own the system.
Read is a solar lease a bad idea.
Power purchase agreement (PPA)
How it works: like a lease, except you pay per kWh the system produces, usually at a rate below your utility’s, often with a yearly escalator.
Cost: depends on production and the rate. EnergySage’s H1 2026 data found PPAs without prepayment cost about 33% more per kWh than buying the system with cash, though they were priced well below utility rates in states like California and Illinois.
Risks: the same as leases, plus your bill rises if the system produces more than expected, and the per-kWh price can climb with the escalator.
Prepaid lease or prepaid PPA
How it works: you pay most or all of the lease cost upfront, then pay little or nothing monthly for the term.
Cost: in 2026, these have been some of the cheapest ways to get solar power. EnergySage found prepaid leases about 39% cheaper per kWh than cash purchases, and prepaid PPAs about 57% cheaper, reflecting the provider’s tax credit.
Risks:
- You still do not own the system.
- You pay upfront for 20 to 25 years of service from one company. If it fails, getting repairs can be hard. Ask who services the system if the provider goes bankrupt.
- Check what happens when you sell: is the prepaid term transferable, and is any value refunded?
For a household that would otherwise pay cash, a well-priced prepaid lease from a financially strong provider is worth comparing seriously.
Side-by-side comparison
Based on the $24,000 example system. Totals are approximate and exclude tax effects.
| Option | Upfront | Monthly (example) | Total paid (example) | You own it? | Main risks |
|---|---|---|---|---|---|
| Cash | $24,000 | $0 | $24,000 | Yes | Ties up savings; deposit risk |
| HELOC (7.34%, 10 yr) | Usually $0 | About $283 | About $33,900 | Yes | Home is collateral; variable rate |
| Home equity loan (8.70%, 10 yr) | Closing costs | About $300 | About $36,000 | Yes | Home is collateral |
| No-fee unsecured loan (8%, 10 yr) | $0 | About $291 | About $34,900 | Yes | Higher rates with weaker credit |
| Dealer-fee solar loan (3.99%, 20 yr, 25% fee) | $0 | About $182 | About $43,600 | Yes | Hidden fee; owe fee if you sell; re-amortization |
| PACE | $0 | Added to property tax | Varies; often high | Yes | Priority lien; refinancing and sale problems |
| Lease ($150, 2.9% escalator, 25 yr) | $0 | $150 rising to about $298 | About $64,800 | No | Escalator; transfer at sale; provider failure |
| PPA | $0 | Varies with production | Varies | No | Escalator; about 33% more per kWh than cash (EnergySage H1 2026) |
| Prepaid lease or PPA | Large | Little or none | Varies | No | Provider failure; transfer terms |
Lease figures are an illustration, not a market average. Get the actual payment schedule from any lease offer and compare it with our lease vs buy tool.
How to choose
- Get the cash price first, in writing, from every installer.
- If you can pay cash without draining your emergency fund, that is usually the cheapest path.
- If you need to borrow, get quotes from your bank or credit union for a HELOC, home equity loan or no-fee loan, then compare total cost with the installer’s financing. Our solar loan calculator shows total cost.
- If you are considering a lease or PPA, ask for the total of all payments, the escalator, buyout terms and transfer rules. Compare against owning in the lease vs buy tool.
- Avoid PACE unless you have read every term and other options are not available.
- Run the result through the calculator or compare options to see whether the financed system still saves money.
Watch out: A low monthly payment is not the same as a low cost. Compare total payments, ask for the cash price, and make sure the payment is lower than the bill savings you can realistically expect.
For a deeper side-by-side, see lease vs buy vs PPA vs loan.
Common questions
What is the cheapest way to finance solar panels?
Paying cash usually costs the least overall, as long as it does not drain your emergency savings. Among loans, a HELOC or home equity loan often costs less in total than a dealer-arranged solar loan, because it does not carry a hidden dealer fee.
Are 0.99% or 1.99% solar loans a good deal?
Usually not. Very low rates are typically paid for by a dealer fee that raises your system price by 10% to 30% or more. Ask for the cash price and compare the total amount you will repay.
Is it better to lease or buy solar in 2026?
Buying usually wins over 25 years if you can pay cash or borrow cheaply and you plan to stay. A lease can make sense if you cannot use a large upfront payment, the price has no or a low escalator, and the lease is clearly cheaper than your utility bill.
What happens to my solar loan if I sell my house?
You usually need to pay it off at closing, unless the buyer's lender and the solar lender agree otherwise. Because dealer fees are part of the loan balance, you may owe more than the system's cash price.
Is PACE financing a good idea for solar?
It is rarely the best option. PACE debt is repaid through your property tax bill, takes priority over most other liens, and can make refinancing or selling harder. Look at a HELOC, credit union loan or cash first.
Spotted an error or outdated number? Email hello@unbiasedsolar.com and we'll fix it. No installer or lender paid for or reviewed this guide.