Solar Loans: Secured vs Unsecured Options Explained

When you decide to go solar, the financing you choose can shape your savings for decades. Two main paths dominate the market: secured and unsecured solar loans. Picking the wrong one might mean paying thousands more in interest, or worse, putting your home at risk. This guide breaks down understanding solar loan options secured vs unsecured, so you can match the right loan to your financial situation and project size. We will walk through collateral, rates, terms, and real world trade offs, with examples that make the decision clearer.

What Makes a Solar Loan Secured or Unsecured?

The core difference comes down to collateral. A secured loan requires you to pledge an asset, typically your home or the solar system itself, as backing for the lender. If you default, the lender can seize that asset. An unsecured loan relies only on your creditworthiness and income, with no specific asset on the line. That distinction drives everything else: interest rates, loan amounts, approval odds, and how the loan interacts with your mortgage and property sale.

Solar loans are not one size fits all. Some secured loans function like a second mortgage or home equity line of credit (HELOC). Others use the solar equipment as collateral through a UCC 1 filing, which lets the lender repossess the panels if you stop paying. Unsecured loans are more like personal loans: the lender approves you based on your credit score, income, and debt to income ratio, and you sign a promissory note without tying the debt to your house.

Understanding these structures matters because solar is a long term investment. A 20 year loan with a 3 percent rate difference can cost you thousands extra. And if you plan to sell your home before the loan is paid off, the loan type affects whether the buyer must assume the debt or whether you need to pay it off at closing. The table below summarizes the key contrasts, and the rest of this article digs into each one.

• Collateral: Secured loans use your home or the solar system; unsecured loans use no collateral.
• Interest rates: Secured loans typically offer lower rates because the lender has a fallback; unsecured rates run higher.
• Loan amounts and terms: Secured loans may allow larger amounts and longer terms; unsecured loans are often smaller and shorter.
• Impact on property: Secured loans may create a lien or affect refinancing; unsecured loans generally do not.
• Approval difficulty: Secured loans can be easier to qualify for if you have equity; unsecured loans demand stronger credit.

Secured Solar Loans: How They Work and Who They Suit

Secured solar loans come in a few flavors. The most common is a home equity loan or HELOC used to pay for solar. You borrow against the equity in your home, often at a fixed or variable rate, and the loan is secured by your property. Another option is a solar specific secured loan where the panels themselves serve as collateral. In that case, the lender files a UCC 1 financing statement, which gives them the right to reclaim the equipment if you default. Some installers offer these loans directly, while others work with specialized lenders.

Because the lender has collateral, they can offer lower interest rates and longer repayment terms. That can make secured loans attractive for larger systems, especially if you have significant home equity and a solid credit score. For example, a homeowner financing a $30,000 system might get a 15 year secured loan at 5 percent, while an unsecured loan for the same amount could carry an 8 percent rate. Over 15 years, that difference adds up to several thousand dollars in interest. Secured loans also may allow higher loan to value ratios, meaning you can borrow more relative to your home's value.

However, secured loans carry risks. If you default, you could lose your home (in the case of a home equity loan) or the solar system (in the case of an equipment secured loan). A UCC 1 filing can complicate a home sale because the buyer may need to assume the loan or you must pay it off before transferring the title. Some lenders also charge higher fees for secured loans, such as appraisal or title search costs. And if you already have a mortgage, adding a second lien may affect your ability to refinance later, since the new lender will need to agree to subordinate their lien.

When a Secured Loan Makes Sense

Secured financing tends to fit homeowners who have substantial equity, plan to stay in the home long enough to recoup the costs, and want the lowest possible interest rate. It is also a good match for larger projects (say, $25,000 and up) where the rate difference is meaningful. If you have a credit score in the mid 600s or higher and can document income, a secured loan may be easier to qualify for than an unsecured loan with a similar rate. Just be sure you are comfortable with the collateral requirement and understand how the lien will be handled if you sell.

Unsecured Solar Loans: Flexibility Without Collateral

Unsecured solar loans are personal loans that do not require you to pledge your home or the solar system. Lenders approve you based on your credit history, income, and existing debts. Because there is no collateral, the lender takes on more risk, which usually translates to higher interest rates and lower loan amounts. Unsecured solar loans are often available through banks, credit unions, online lenders, and甚至 some solar installers who partner with financing companies. They typically range from $5,000 to $50,000, with terms from 5 to 12 years, though some lenders offer longer terms.

The appeal of unsecured loans is simplicity and flexibility. There is no lien on your home, so your mortgage and property title stay clean. That makes selling your home easier: you can pay off the loan at closing from the sale proceeds, or in some cases the buyer may not need to deal with the loan at all. Unsecured loans also do not affect your ability to refinance your first mortgage, because the lender does not need to negotiate lien position. And if you default, the lender cannot repossess your home or your solar panels (though they can sue you and damage your credit).

The trade off is cost. Unsecured loans generally carry higher interest rates, often 2 to 5 percentage points above secured loans. For a $20,000 loan over 10 years, a 10 percent rate versus a 6 percent rate means paying about $5,000 more in interest. Unsecured loans also may have origination fees and may not cover the full cost of a large system. If your credit score is below 650, you may not qualify at all, or you may face even higher rates.

When an Unsecured Loan Makes Sense

Unsecured financing is a good fit if you have strong credit (typically 700 or higher), a smaller project (under $20,000), or you plan to move within a few years and want to avoid lien complications. It is also useful if you have little home equity but good income and credit. If you want to keep your home's equity untouched for other goals, like a renovation or emergency fund, an unsecured loan preserves that flexibility. And if you are uncomfortable with the idea of your home being on the line, unsecured removes that risk.

Interest Rates, Terms, and Fees: A Side by Side Look

Interest rates for secured solar loans often start lower because the lender's risk is reduced. As of 2026, typical secured solar loan rates range from about 4 percent to 8 percent, while unsecured loans range from 7 percent to 15 percent, depending on credit and lender. Terms for secured loans can stretch to 20 or 25 years, while unsecured loans usually max out at 12 years, though some go to 15. Longer terms lower your monthly payment but increase total interest, so compare the APR, not just the rate.

Fees also differ. Secured loans may come with closing costs similar to a mortgage: appraisal, title search, and recording fees. Unsecured loans often have origination fees of 1 to 5 percent, but no closing costs. Some solar specific secured loans have no fees but may include a dealer fee that is baked into the price. Always ask for a Loan Estimate or truth in lending disclosure to see the full cost.

Here is a quick comparison of typical ranges (your actual numbers will vary):

• Secured loan rates: 4% to 8% APR; terms 10 to 25 years; possible closing costs.
• Unsecured loan rates: 7% to 15% APR; terms 5 to 12 years; possible origination fee.
• Loan amounts: Secured may go up to $50,000 or more; unsecured often caps at $50,000 but many lenders max at $25,000.

Remember that solar loans are not the only financing option. Some homeowners use a cash out refinance or a HELOC, which are secured by the home but may have different terms. If you are also considering battery storage, our guide on understanding solar battery storage cost and long-term savings explains how to factor storage into your overall budget.

Impact on Refinancing and Selling Your Home

Secured loans can complicate both refinancing and selling. If you have a second lien from a solar loan, your first mortgage lender will need to agree to a subordination agreement before you can refinance. Some lenders are fine with this; others may refuse or charge a fee. A UCC 1 filing from an equipment secured loan can also slow down a sale because the title company will need to clear the lien. In many cases, you will need to pay off the solar loan at closing from the sale proceeds, which reduces your net proceeds.

Unsecured loans are generally invisible to your mortgage lender and title company. You can refinance your first mortgage without needing to involve the solar lender. When you sell, you simply pay off the unsecured loan like any other personal debt, and the buyer takes the home free of any solar related lien. That flexibility can be a big advantage if you expect to move within 5 to 7 years. However, if you have a low interest rate on your first mortgage, refinancing may not be worth it anyway, so the secured loan's impact on refinancing may be less relevant.

One more consideration: some solar loans are assumable, meaning the buyer can take over the loan. That can be a selling point, but it also means the buyer must qualify for the loan. Assumable loans are more common with secured solar loans, especially those backed by the system. If you plan to sell, check whether your loan is assumable and what the process entails. For a broader look at relocation resources, see Moving.Homes, which offers checklists and guides for homeowners planning a move.

Which Loan Type Fits Your Credit Profile and Project Size?

Your credit score and the size of your solar project are the two biggest factors in choosing between secured and unsecured. Here is a simple framework:

1. Credit score 720+ and project under $20,000: You will likely qualify for the best unsecured rates. Compare unsecured offers first; the simplicity may outweigh the slightly higher rate.
2. Credit score 680 to 719 and project $20,000 to $40,000: Secured loans may offer better rates and larger amounts. Check home equity options and solar specific secured loans.
3. Credit score below 680 and project over $40,000: Secured loans may be your only option, as unsecured lenders may deny you or charge very high rates. Be cautious about collateral risk.
4. Planning to move within 5 years: Lean toward unsecured to avoid lien complications, even if the rate is slightly higher.
5. Have significant home equity and want the lowest cost: A secured loan or HELOC can be the cheapest way to finance solar, provided you are comfortable with the risk.

Also consider your overall debt load. If you already have a high mortgage balance and other debts, adding a secured loan increases your total secured debt, which may affect your credit mix and future borrowing. Unsecured loans may have a smaller impact on your credit score in the short term, though they still count toward your debt to income ratio. Run the numbers with a few lenders before committing. And remember that federal tax credits and state incentives can reduce your net cost, so factor those in when comparing loan offers.

Finally, do not overlook the importance of getting multiple quotes. Solar loans are often arranged through the installer, and the rates can vary widely. Request quotes from at least three lenders, including your local bank or credit union, and compare the APR, fees, and terms. A difference of a few percentage points can save you thousands over the life of the loan. With a clear understanding of secured versus unsecured options, you can finance your solar system with confidence and maximize your return on investment.