Understanding the cost of financing
What financing actually costs you
For a $22,000 system financed at 7.5% over 15 years, total interest paid comes to about $14,710, the added cost of spreading payments out instead of paying cash upfront. That's a substantial amount relative to the system cost itself, though it buys you the ability to go solar without a large lump sum. For the official overview, the US Department of Energy's homeowner's guide to going solar covers buying, leasing, and system sizing.
Checking whether you're cash-flow-positive
In this example, the annual loan payment of about $1,713 stays just below the $1,800 in annual savings, keeping the system cash-flow-positive from year one. That margin is narrow though, and can flip with a higher interest rate or a shorter loan term, so it's worth checking carefully against your own quote rather than assuming it always works out. The Consumer Financial Protection Bureau's owning a home resources cover the costs of owning a home beyond the mortgage.
Typical solar loan terms
Solar loans commonly run 10 to 20 years with rates in the 5% to 9% range, though specific offers vary by lender and credit profile. Longer terms lower the monthly payment but increase total interest paid over the life of the loan, a tradeoff worth testing with a few different term lengths and comparing against the ROI percentage calculator. If you will borrow for the system, the Loan payment calculator shows what the same cost looks like month by month.
When cash isn't automatically the better choice
Paying cash avoids the interest cost entirely, and often produces a better net present value outcome on paper. But a loan preserves liquidity, which some homeowners value more than the interest savings, particularly if that cash has other productive uses or serves as an emergency reserve. See the cash vs lease comparison for a third financing path worth weighing too.
Related tools in other categories
Rebates shorten payback a lot. The sales tax exemption savings calculator in our Rebates & Incentives section estimates what you can claim for your state before you lock in a payback figure. For the CFPB's home financing resources, see CFPB.