If you’ve been contemplating the purchase of a solar panel system for your home using solar financing, is now a good time to explore your options? In this post, we take a closer look at the Fed’s interest rate cut and how it could affect financing in the booming Texas solar market.
Residential solar offers Texans a multitude of benefits. Aside from reducing utility costs, solar can boost the value of your home, keep the lights on during power outages (when paired with battery backup), and contribute to a cleaner, healthier environment.
Now, with the expected decline in lending interest rates, financing solar (vs. paying for your system in cash) may now be back in vogue. First, a bit of context.
What’s happening with interest rates?
In September 2024, the Federal Reserve slashed its key interest rate by half a percentage point (0.50). Today, the Fed’s benchmark lending rate ranges from 4.75% to 5%.
When the Fed lowers its benchmark interest rate, this action typically leads to lower interest rates for loans and credit cards. In many cases, this triggers lower rates for solar financing, too.
How does the Fed’s rate cut affect solar loans?
Thanks to the Fed’s rate cut, borrowers may now enjoy more attractive interest rates for solar loans. Interest rates for solar loans generally range from 1.99% to 10%, depending on the market and the terms of the loan. But that may be changing, if mortgage rate declines are any indication.
Low financing costs contributed to the rapid growth of residential solar installations from 2017 to 2022, according to leading research firm Wood Mackenzie. But as the Fed raised interest rates, demand for residential solar power softened. With the Fed’s return to rate-cutting mode, demand is expected to pick up once again. In fact, Wood Mac predicts that solar lending activity will be on the rise from 2025 to 2028.
How does solar financing work?
Longhorn Solar offers financing through several partners, providing zero-down solar financing with competitive interest rates. A borrower can receive instant approval for solar financing through Longhorn Solar’s quick and easy application process.
“A solar loan works exactly like any personal loan — a lender gives you the money to pay for your solar energy system and you pay them back with interest over time,” according to the Solar Action Alliance.
Longhorn will guide you through the process and carefully explain the options on solar financing. We currently partner with EnFin Partners, which is backed by QCells, and Sunlight Financial, whose loans are provided through Cross River Bank.
The benefits of lower interest rates for solar loans
Simply put, the biggest benefit of a lower-rate loan is that a borrower pays less interest over time, meaning lower monthly payments and a lower overall cost to equip your home with solar panels.
When interest rates for solar financing go down, the financial payoff for installing a residential solar panel system becomes more tempting. The average U.S. homeowner saves about $50,000 on electricity over the life of their system, according to EnergySage. The decreased cost of borrowing money for a residential solar panel system can increase the monetary edge gained from lower utility bills.
Solar installation costs down 15-20%
All the benefits of solar are magnified when you purchase a solar panel system with a loan that charges a lower interest rate. But it’s important to note that solar installation and product costs have decreased significantly, costing 15-20% less over the same time last year. In fact, according to Solar Reviews, in 2010 the average-sized solar system cost over $50,000. Today, it costs less than half that.
The Fed’s rate cut gives homeowners a good reason to consider solar financing – but in any market solar is a good investment – raising the value of your home, keeping your energy rates down even when utilities raise them, and of course, helping to reduce carbon emissions from fossil fuel power plants.
Is now a good time to go solar? Our answer: Always!
Have more questions on solar financing or the solar installation process? Sign up for a pressure-free consultation from Longhorn Solar.
