How this solar loan calculator works
Most homeowners care less about IRR than about one plain thing: will the panels cost more each month than they save? This calculator puts the monthly loan payment next to the monthly reduction in your electricity bill for every year of the system’s life, then compares three paths over the analysis period: financing with a loan, paying cash, and doing nothing.
Savings come from your annual production, split between electricity you use yourself (worth the full retail price you avoid) and electricity you export (worth the export or feed-in price). Production falls slightly each year with panel degradation, while the value of each kWh rises with electricity price inflation. Maintenance and an inverter replacement are deducted.
The loan is a standard fixed-rate monthly annuity. Any origination or dealer fee is added to the amount financed; it is the most common hidden cost of “low-APR” solar loans. Both the cash and the loan path are then discounted at your opportunity cost (the return your savings would otherwise earn) to show which one wins at present value.
The formulas
Worked example: a 6 kWp home system
The defaults describe a 6,600 system producing 7,300 kWh a year (a 6 kWp array near Bucharest), 60% self-consumed at 0.25 per kWh, the rest exported at 0.06, financed entirely with a 10-year loan at 7%:
- Blended value per kWh: 0.6 × 0.25 + 0.4 × 0.06 = 0.174
- Year-1 savings: 7,300 × 0.174 = 1,270, i.e. ≈106 per month
- Loan payment: ≈77 per month; total interest ≈ 2,600
- Net monthly cash flow in year 1: ≈ +24, so cash-positive from the first month
- Over 25 years: ≈31,900 net benefit with the loan versus ≈34,500 paying cash (5.2-year cash payback, about 20% IRR)
At a 3% return on savings, paying cash is better by about 1,200 at present value. If your savings earned 8% instead, the loan would come out ahead.
How to read the results
- Net monthly cash flow (year 1) is the headline for household budgets: positive means the panels more than cover their own loan.
- Net benefit compares cumulative money over the full period; NPV loan vs cash adjusts for the time value of money.
- Loan break-even is when cumulative net cash turns positive. It shows zero if you are cash-positive from day one with no down payment.
- The bar chart shows how savings grow while the payment stays flat, then disappears after the loan term.
Typical values
| Item | Europe | United States |
|---|---|---|
| Installed price (residential) | 1,000–1,600 per kWp | 2.5–3.5 USD per W before credits |
| Loan APR | 4–9% | 7–10% (no fee) / 1.5–4% (with 15–30% fee) |
| Loan term | 5–15 years | 10–25 years |
| Specific yield | 900–1,700 kWh/kWp | 1,200–1,800 kWh/kW |
| Self-consumption without battery | 30–60% | often 100% with net metering |
Tips
- Get the cash price in writing and compare it with the financed total; a cheap APR with a big fee is often the most expensive option.
- Match term to payback. A term slightly longer than the simple payback usually keeps you cash-flow positive.
- Raise self-consumption. Run appliances at midday, or add a battery if export prices are low; see the solar panel calculator.
- Borrow cheaply. A mortgage top-up or green mortgage usually beats an unsecured loan.
- Check prepayment terms so you can repay early when a grant or tax credit arrives.
Limitations
The model uses constant annual production and a single escalation rate; real savings fluctuate with weather and tariffs. It does not include tax effects of interest, changes in net-metering rules, battery degradation or the effect of solar on property value. The loan is a simple annuity; balloon payments, deferred-interest periods or variable rates need separate treatment.
Method & assumptions
Monthly payment = P · r / (1 − (1 + r)−n), with r = APR ÷ 12 and n = months. Each year, savings = kWh × (1 − degradation)t−1 × blended value × (1 + price growth)t−1. Net cash flow with loan = savings − maintenance − loan payments; with cash = savings − maintenance after paying the full price at year 0. Both streams are also discounted at your opportunity cost of money: if your cash would earn more elsewhere than the loan costs, financing can beat paying cash.
Frequently asked questions
Is it better to pay cash or take a loan for solar panels?
What is a typical solar loan interest rate?
How much will my monthly payment be?
What is a solar dealer fee?
Can solar panels be cash-flow positive with a loan?
Do tax credits change the calculation?
Sources & references
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