The team’s second priority should be helping residents who wish to own their system (which maximizes lifetime cost savings and increases property values) access affordable capital. The team can start by familiarizing themselves with the types of solar loans offered locally. The three primary types of secured solar loans, where the solar PV system is secured to an asset as collateral for the borrowed money, are:
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Solar system–secured loans:
These are the most common loans and use the solar PV system as collateral for the money borrowed. So, if the homeowner defaults on their payment, the lender can remove the solar PV system.
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Home improvement loans:
These include home equity installment loans, fixed-term loans based on the equity in the home (i.e., second mortgages), and home equity lines of credit (revolving credit lines with a draw period and repayment period, similar to credit cards).
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Home refinancing loans:
These are specific to homeowners looking to refinance their home for better terms, including government-sponsored enterprises such as Fannie Mae’s HomeStyle Energy Mortgage and Freddie Mac’s GreenCHOICE mortgage, both of which allow borrowers to finance up to 15% of their property’s value to pay for solar.
The Solarize team can integrate solar loan offerings into its campaign by partnering with a mission-aligned financial institution (FI), such as a community development financial institution or credit union, that offers better loan terms than standard banks. Teams can also identify FIs that are minority -owned or -serving FIs (e.g., Black-owned banks) to further increase marginalized residents’ trust in a Solarize campaign and strengthen its community-empowerment impact. When researching these FIs, teams should compare the loan terms and conditions across providers. Three types of FIs to consider partnering with include:
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Local FIs:
Local governments may have FIs in their state focused on clean energy deployment for lower-income residents, such as the Solar and Energy Loan Fund, which provides primarily Florida residents with unsecured home improvement loans. These unsecured solar loans typically have a 3- to 10-year term at a 5%–10% interest rate with no minimum credit score requirements.
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National FIs:
If there is not a local FI that can offer affordable rates, the local government may consider partnering with a national FI, such as the Clean Energy Credit Union. Its solar electric loans are secured to the solar equipment and include a 5%–5.5% interest rate over a 12- to 20-year term. Although standard eligibility requirements include a minimum FICO score of 680 and a maximum debt-to-income ratio of 41%, the credit union does approve homeowners outside of the standard bands on a case-by-case basis.
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National and local FIs:
If a local mission-aligned FI does not offer solar-related loans, the local government could consider partnering with a national FI, such as Inclusive Prosperity Capital. Its Smart-E Loan Program is a national platform that provides contractor oversight and outreach support for local FIs to integrate into their lending offerings. The program provides 5- to 20-year loans at a 4.5%–7% interest rate while accommodating credit-challenged borrowers (FICO scores 580 or higher) and leveraging a loan loss reserve (LLR).
Suggested Next Steps:
Identify potential FIs to partner with for a Solarize campaign. Consider using Part 2 of RMI’s forthcoming Inclusive Solarize Campaign: Developing LMI Financial Solutions Worksheet for assistance.