It is interesting how many people install solar panels despite the systems requiring high upfront costs. However, that’s understandable, thanks to the many financing solutions.
One of the common financing solutions is the solar loan. Whereas there are other choices, including community solar programs, power purchase agreements, and solar leases, our focus is on the loans.
Like any similar product, you must adhere to all the payment agreements until you pay the last dime, usually the principal plus interest. Failure to do it has dire consequences, including property repossession.
In this case, can solar panels be repossessed? Let’s find out and learn more about solar loans by checking this article out!
Will My Solar Panels Be Repossessed for Defaulting a Solar Loan?
This answer depends on the solar loan you take. Here’s a discussion on the various solar loans and the ones to repossess your solar panels if you default on the payment.
Secured Solar Loans
It is a point-of-sale (POS) financing option common among solar system retailers. The loans are secured since you must pledge collateral if you default.
That’s the striking similarity between this solar and car loan type. Consequently, the lender may repossess the solar panels upon failing to repay the necessary loan repayment.
However, don’t let the collateral bit discourage you from considering secured solar loans. After all, the interest rates are lower than what their unsecured counterparts demand.
Unsecured Personal Loan
It is worth noting that this should be the last financing option you consider when installing solar systems. That’s due to their high-interest rates, enough to cripple your repayment, thus increasing the chances of defaulting.
It has some advantages, including not losing your assets right away. Besides, their repayment terms range from 2 to 7 years.
Home Equity Loan
It is also called a home equity line of credit (HELOC). It is the difference between your mortgage balance and your home’s market value.
It is often considered due to its low-interest rates. However, one needs to be cautious since it is possible to lose your home, which secures such a loan upon defaulting on such a loan.
Local Governments or Utilities Solar Loans
Some residents are lucky to get solar loans from their local and state governments. The administration offers incentives such as rebates through various loan programs.
So, all that’s needed is to find and apply for an available loan program. These loans are the most favorable with low rates, thus easily payable.
However, you should also expect consequences if you default. The cause for action usually differs from one state to another.
It is a financial solution available to people purchasing new homes. As the name suggests, you get a mortgage to go green, thus using it to install a solar system.
It differs from the primary home mortgage, which translates to the ability to borrow another amount for the solar system. The amount you get determines your home’s new value upon the solar upgrade.
Again, its interest rates are pocket-friendly and thus ideal. However, losing the home may be inevitable if you default.
R-PACE Solar Loans
R-PACE stands for Residential Property Assessed Clean Energy Program solar loans. It doesn’t require you to repay the loan using your funds.
On the contrary, it attaches it to your house, thus allowing you to pay the loan using your property tax payment with a repayment period of between 10 and 20 years.
However, it is not quite common in most areas. Some people most likely enjoy these solar loans from Missouri, Florida, and California.
It is important to note that these loans get tricky when selling your home. Two possible outcomes depend on your agreement with the new owner.
First, the next homeowner could be willing to take up the loan and thus continue paying it accordingly. Consequently, your obligation to service the R-PACE goes to the new owner since you no longer own the house.
On the other hand, some homeowners may not want these additional responsibilities. So, you must pay the loan before selling the house.
In some cases, it complicates the process of selling the house. However, it isn’t a bad financing solution thanks to its low rates.
What Happens if One Defaults on a Solar Loan
As explained above, defaulting on a solar loan has various consequences. One is repossessing the solar panels, especially if the loan was secured.
In some cases, the defaulted amount isn’t a huge amount. Under these circumstances, the small claims court comes in.
This solution is only applicable if the amount doesn’t exceed $10000. The payment, in this case, may come from your wages or bank account, depending on the judgment.
Your utility provider may also receive a notice. Your credit score may not be spared, and some defaulters even lose their jobs.
Nevertheless, one hardly incurs the cost of the effort and money needed to repossess or remove the solar panels. With a secured loan, there is a need to file a lien against the solar panels or property that served as collateral.
What Is a Solar Lien?
What does it mean when a lender files a solar lien? It is a legal claim by your loan creditor over the asset you listed as collateral upon failing to satisfy the loan.
Its establishment may follow a judicial judgment or be a lender initiative. Besides debt repayment, a lien also applies when securing an underlying commitment.
One of its major components is the asset subject to a particular lien. If one doesn’t meet the underlying obligation, the lender has a right to seize that asset, also known as collateral.
Besides seizing, the lender can also liquidate it after a default. On the other hand, the defaulter can’t sell the asset or item in question.
Some solar liens are consensual or optional, while others are statutory or involuntary. Besides solar loans, such liens also apply to other loans.
However, it only applies when your solar loan is secured. In most cases, lenders place the lien on the solar panel system, which is crucial during repossession.