Finance

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Installing a Solar Solution can be a daunting task. Especially when you look at the capital expense that you need to lay down. This online guide covers how to finance your residential solar system, a crucial step in determining if solar panels are worth it for your home (we are holding thumbs!). Learn the pros and cons of direct ownership and third-party ownership.

How do I go about paying for Solar?

The best way to finance your solar installation depends on a number of factors in your lifestyle. Speak to an expert for valuable and credible advice about how to finance solar panels. There are pros and cons to every option, and each will have a different implication for how much solar panels will save you and how long it will take for solar panels to pay for themselves.

You will need to have an understanding of what a Solar System costs in the first place before you can start to think about financing your solution. More often than not, people rush to get quotes to put solar on their house, without knowing what the costs associated are. 

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Residential solar financing options can be generally divided into two different categories: Direct Ownership (you own it) and Third Party Ownership (they own it and you use it). Read on to learn about your options within these categories, and the basic pros and cons associated.

Solar Loan

Apply for a loan for your solar project

Solar Rental

Rent to own your solar system over a period of 5 - 10 years

Power Purchase Agreement (PPA)

Purchase power from a 3rd party instead of your municipality

The different options to acquire Solar

Cash Purchase

Cash is king! If you have enough saved up for this significant upfront purchase, buying solar panels outright with cash will provide you with the best savings and return on investment. It’s the best and only kind of interest-free solar power.

Your solar system will be producing “free” energy and saving you money from the day it’s turned on. The typical payback period for rooftop solar in the South Africa is 7-12 years, depending on the size of your system and the kind of solar panels and other equipment you selected.

Taking Out A Loan

If you don’t have the capital to install Solar for your home, you can take out a loan to help with the process. There are numerous third party lenders that will help you with applying for a loan for your solar project. Currently in South Africa there is not a Loan Product that is specifically designed for a solar installation, so the majority of the lenders will offer you an unsecured loan. You should always be aware that the interest rates on these types of loans are generally high and the chances of qualifying for the full amount of the solar installation is very low. This is why we encourage our clients that are looking for a loan for their solar solution to only apply for the portion that they have not budgeted for. 

For example, if the solar installation is going to cost R140 000, and you have saved up R80 000. Only apply for the difference in cost, which is R60 000.

This insures that your repayments are reduced and the chances of you qualifying for the smaller amount increases. 

In order to apply for a loan for your Solar Installation you will need:

  • a design and quote of your system to determine the size of your loan,
  • a loan application,
  • 3 month bank statements 
  • Proof of ID
  • Proof of Residence

Third Party Ownership

Solar Rental

A solar rental is similar to a solar loan in the sense that both are forms of residential solar financing options. But the similarity pretty much stops there. With a solar lease, you are renting your system from a third party owner. You pay the owner a fixed monthly payment for the full term of the lease, which is typically 15-20 years. Instead of paying your utility company for energy, you would now be paying the solar company for using the panels.

Lease payments may include an escalator, this is a percentage that your monthly payments will increase by year-to-year. Monthly payments are fixed and do not depend on your month-to-month energy production or consumption, so they may be an overstatement, especially when the escalator increases prices down the line.

If you decide to sell your house while leasing a solar system, there are methods to transfer the lease over, but they are difficult and slow.

It is more lucrative to purchase your solar system if you are interested in the long term value of your home plus the system.

At the end of your lease term, you have the option to renew the lease for an additional 5-10 years, remove the system from your home, or purchase the system at fair market value.

In order to apply for a rental for your Solar Installation you will need:

  • a design and quote of your system to determine the size of your loan,
  • a rental application,
  • 3 month bank statements 
  • Proof of ID
  • Proof of Residence
  • Min. monthly salary of R40 000rental
Solar Power Purchase Agreements (PPA)

What’s PPA solar financing? You can buy the actual electricity produced by the solar system, rather than renting the entire solar system for a fixed price (that may exceed what you actual use). A Purchase Power Agreement (PPA) also constitutes third party ownership, because the PPA provider owns the system on your roof. You will pay the PPA provider a pre-negotiated price per kilowatt hour.

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At Versofy we believe in sustainable energy and building a network where people are able to gain access, learn and adopt our sustainable outlooks.