"Looking for the best options for a loan for solar panel installation in India? Explore this blog to find affordable financing solutions for your solar energy needs."
Published: 21 February 2025
Updated: 11 March 2025
Do you get high electricity bills every month? It is a wise decision to switch to solar energy. The cost of power is increasing, and power cuts are common in most areas. Solar panels reduce your electricity bills. They provide backup power and also save the environment.
The upfront cost of solar panel installation can be costly. A standard 3kW rooftop solar system will cost between ₹1.5 lakh and ₹2 lakh, and a 5kW system will cost more than ₹3 lakh. Not everyone can afford to pay this amount in one go.
There are numerous solar panel loan options available in India. These options make solar power more accessible. In this blog, we will discuss how to fund your solar panel installation. We will compare loan types and interest rates. We will also examine government subsidies to reduce the cost of solar panel financing.
A solar panel loan enables home and business owners to purchase and install solar energy systems. Borrowers have the option of paying over time rather than in a lump sum. This makes solar energy more accessible. Such loans have fixed interest rates and fixed repayment schedules. Users can reduce their electricity bills and have access to renewable energy.
Let us try to understand with an example, Rahul wishes to install a solar panel on the roof of his house. He wanted to reduce his electricity bill and avail himself of the subsidies offered by the government. He went for a solar panel loan from a bank rather than making the entire instalment payment of ₹3,00,000 all at once. He takes a loan with repayment over five years at an interest rate of 9%. His savings on electricity bills contribute to repaying the loan in the long run. This makes solar energy an intelligent and sustainable investment.
Several Indian banks have green energy loans. These loans provide financing for home, business, and industrial solar panel installations. These loans provide low interest rates, extended repayment terms, and flexible EMI options. It is thus a perfect option for anyone looking to invest in solar power.
A good option is the SBI Surya Shakti Solar Loan. It extends funding to home and business solar installations. Some other banks like Punjab National Bank provide loans to install solar power systems.
Bank loans to purchase solar panels have some advantages. They have less interest. You also have repayment flexibility. Further, you might be eligible for tax relief under Section 80EEA of the Income Tax Act.
Need quick financing? NBFCs and fintech lenders offer online loans for solar panels. Their application process is simple, and you can get approved faster. These loans help people or businesses that can't get regular bank loans. This is often because of strict credit rules.
Lenders like My Mudra, Tata Capital, and HDFC Bank provide solar financing. They offer easy EMIs and need minimal paperwork.
Homeowners with a current home loan can use a top-up. It's a smart way to finance solar panel installation. Lenders tie top-up loans to an existing home loan. So, they usually have lower interest rates than personal loans.
ICICI Bank, HDFC Bank, and SBI provide home loan top-ups. You can use these funds to install solar energy systems. Borrowers can enjoy lower interest rates. They also enjoy long repayment periods and need less extra paperwork.
Need solar energy without the initial investment? Look into solar leasing or Power Purchase Agreements (PPAs). A solar company installs and services the solar panels. The consumer pays a monthly fee or an amount per unit of electricity produced.
In India, companies can avail solar solutions on lease. These are offered by Amplus Solar, Fourth Partner Energy, and Azure Power. The major advantage of this mode of financing is that there is no initial cost. Additionally, the maintenance is handled by the service provider. They also give instant savings in electricity bills. This is thus a hassle-free and cost-effective option for solar power.
The Indian government is promoting solar power. They achieve this through providing subsidies, financial grants, and low-cost loans. These programs reduce the price of solar panel setups. This makes solar panels accessible to more individuals, including farmers and small companies.
One of the major initiatives is the PM-KUSUM scheme. It provides farmers with subsidies to enable them to install solar pumps and solar power plants. The Ministry of New and Renewable Energy (MNRE) provides up to 40% in subsidies for solar panels on residential rooftops.
Solar loan rates of interest in India differ depending on the lender, loan size, and repayment tenure. Mostly, various financial institutions provide different rates:
The best solar loan is one that is affordable, has a long tenure, and is easy to get approved for. Banks have average interest rates. NBFCs and fintech lenders are more flexible. Home loan top-ups are an affordable option.
The interest rate on your solar loan depends on three key factors:
Let’s look at an example. Ravi lives in Pune. He wants to install solar panels. This will help him cut his electricity bills. He applies for a ₹3 lakh loan at 10% interest for 5 years.
Loan Amount: ₹3,00,000
Interest Rate: 10% per annum
Tenure: 5 years (60 months)
Using a loan EMI calculator, Ravi finds out that his monthly EMI will be ₹6,374. Over 5 years, his total repayment will be ₹3,82,440, meaning he pays ₹82,440 in interest.
Now, if Ravi chooses a shorter tenure of 3 years, his EMI increases, but he pays less total interest. However, a longer tenure reduces his EMI but increases the total interest paid.
Choosing the right loan tenure is important. It helps balance affordability and total cost savings!
Avoid these major mistakes to make the most of your solar investment:
Always check for processing fees, prepayment charges, and hidden costs to avoid surprises.
Compare different banks, NBFCs, and fintech lenders to secure the best rate.
Many homeowners forget to apply for MNRE subsidies, leading to higher costs.
Always choose BIS-certified solar panels for better efficiency and long-term durability.
Want to finance your solar panels the right way? Here’s how to find the best loan:
Banks, NBFCs, and fintech lenders have different interest rates. Banks usually provide lower rates but may have a longer approval process. NBFCs and fintech lenders offer quicker approvals and often have minimal paperwork. Comparing many options helps you secure the best deal.
A CIBIL score over 750 can help you get a lower interest rate. Lenders consider high scores a sign of responsible financial behaviour. To boost a low score, pay off debts, make timely payments, and lower credit usage before applying for a loan.
Your loan tenure impacts your monthly EMI and total interest cost. A shorter loan term means higher EMIs. But, it reduces total interest, helping you pay off your loan faster. A longer tenure reduces your EMI but increases your pay over time. Choose a tenure that balances affordability and long-term savings.
The Indian government provides subsidies to help people adopt solar energy. For instance, MNRE (Ministry of New and Renewable Energy) gives subsidies. This support helps cut your initial costs. Some banks also provide green loans at lower interest rates. Checking for these incentives can help reduce your financial burden.
Look over the terms and conditions before closing any loan. Watch out for hidden charges, processing fees, prepayment penalties, and late payment fees. Some lenders charge high fees for early loan repayment, which can impact your savings. Always clarify these details to avoid unexpected costs.
Compare many lenders, negotiate rates, and pick a plan that saves you the most in the long run!
Investing in solar power is a wise decision for your pocket and the planet. However, getting the right solar loan is just as crucial as getting the right solar system. Save money by comparing interest rates. And make use of government subsidies. And lastly, pick a financing plan that suits your budget. Don't be discouraged by high initial costs. Make a wise decision and reap the rewards of solar power today. Go green, save more, and power your future the smart way!
Also read: Switch to Solar with Affordable Solar Rooftop Loans
Most lenders must have a CIBIL score of at least 650, but 750+ is ideal for better rates.
Interest rates range from 7% to 18% per annum, depending on the profiles of the lender and borrower.
Most borrowers prefer 12-year or 20-year solar loans. A 12-year loan has higher EMIs but saves on total interest. In contrast, a 20-year loan has lower EMIs but costs more in interest.
