Solar loans: what to avoid

A low monthly payment can hide an expensive solar loan. Compare the cash price, amount financed, total payments and payment-change conditions before deciding whether the financing is affordable. Solar production does not cancel your obligation to repay a loan.

Ask for two prices for the same installation

Get an itemized cash quote and a financed quote with the same equipment, system size and installation scope. In its 2024 Solar Financing issue spotlight, the Consumer Financial Protection Bureau documents dealer fees and other markups embedded in loan principal. The report describes a risk, not a claim that every lender charges the same fee.

Hypothetical example: a system priced at $24,000 cash but financed for $30,000 starts with a $6,000 difference before interest. A lower advertised rate does not erase that difference. Ask what accounts for it and compare another financing offer using the same cash scope. The example is not a current market quote or a statement that every markup is unlawful.

Request the APR, interest rate, finance charge, amount financed, total of payments and complete payment schedule in writing. Check whether the quoted payment includes an assumption that you will make a large early principal payment. Do not compare loan offers only by the first monthly payment or only by the interest rate.

Do not borrow against an assumed tax refund

The CFPB report describes loans whose payments rise unless the borrower makes a substantial early prepayment. Its historical tax-credit discussion reflects the rules discussed in 2024 and is not current eligibility guidance. The current IRS credit page states that property placed in service after December 31, 2025 is not eligible for the residential clean energy credit.

For a new 2026 installation, ask the lender to show the repayment schedule without an assumed 30% federal credit payment. For an older qualifying installation, eligibility, tax liability and timing still matter; a credit is not a universal cash refund. Obtain independent tax advice rather than treating a salesperson's estimate as approval.

Before you sign

• Ask when payments begin: signing, delivery, installation or permission to operate. Budget for possible delays.
• Get the payment if you make no optional prepayment, and the exact date any change takes effect.
• Check prepayment penalties, re-amortization terms, collateral or liens, and payoff requirements when selling.
• Ask which company handles installation defects and which handles loan complaints; they may be different firms.
• Read cancellation and dispute terms before signing, and keep copies of the cash quote, loan disclosures and sales promises.

Test the household budget, not just the sales projection

Model the loan payment plus the remaining utility bill. Fixed charges, nighttime imports and lower-than-forecast production can leave meaningful electricity costs. Ask how the projection treats export credits, rate changes, maintenance and a system outage. Run a lower-savings case as well as the salesperson's case.

A lease or PPA is a different arrangement, not a free system. A lease usually charges for using the equipment; a PPA charges for energy under the contract. Compare escalators, responsibility for repairs, roof access, transfer approval, buyout and end-of-term removal. Avoid assuming any option is always cheapest.

Use the quote comparison tool for comparable cash prices per DC watt. Use the buyer checklist for contract questions. Neither tool evaluates credit suitability or replaces the lender's disclosures.

Source review: 2026-09-20. CFPB, published August 7, 2024, supports the financing risk discussion; IRS supplies the current federal-credit cutoff. This guide is educational, not individual lending or tax advice.