If you’ve ever sat through a solar pitch in your living room, you know the moment the salesperson pulls up the tablet and shows the monthly payment. What you probably don’t know is everything that happens behind that screen. This is the breakdown.
It starts with a contractor network
Almost every U.S. solar loan you’ll be offered is brokered by a point-of-sale lender — Sunlight Financial, GoodLeap, Mosaic, Dividend, or Sungage — through a network of vetted installers. The lender doesn’t lend directly to homeowners. Instead, it provides software (Sunlight calls theirs Orange®) that the installer’s sales rep uses to underwrite you on the spot.
The instant credit decision
The salesperson enters your name, address, income, and SSN. The lender runs a soft pull, applies its scoring model, and returns an approval, conditional approval, or decline in seconds. The decision is based on:
- Your FICO score and credit history
- Your stated income and estimated DTI
- The loan amount and term length the contractor requested
- The dealer-fee tier the contractor selected
Dealer fees: the part nobody mentions
The reason a solar loan can be quoted at 0.99% APR while a 15-year mortgage is at 6% is the dealer fee. The contractor pays the lender a percentage of the project price (often $1.50–$5.00 per watt of system capacity) in exchange for being able to offer the low promotional APR. That fee is folded into the system price you finance.
On a 10-kW system with a $3.50/W dealer fee, the contractor pays the lender $35,000 — and your “system price” is $35,000 higher than the cash price. You still pay the dealer fee; it’s just hidden in the principal rather than itemized.
You sign two documents, not one
The closing packet has two distinct pieces:
- The installation contract with the contractor — covers the system, warranty, installation timeline.
- The loan agreement with the originating bank (Cross River Bank in most Sunlight loans) — covers principal, APR, term, monthly payment, and amortization structure.
Read the loan agreement at the kitchen table. The APR and monthly payment must match what the salesperson quoted. If they don’t, stop.
The re-amortizing structure
Many solar loans are re-amortizing — the monthly payment assumes you’ll apply roughly 30% of the principal as a lump payment within the first 18 months, using the federal solar Investment Tax Credit (ITC) you’ll claim on your tax return. If you make that lump payment, the loan stays at the low monthly. If you don’t, the loan re-amortizes over the remaining term at the higher principal, and your monthly payment jumps significantly — sometimes by 30%–50%.
This is the single most common cause of solar-loan complaints. Borrowers assume they’ll get the ITC. Some can’t — they don’t have enough federal tax liability to use a $10,000+ credit. Confirm with a CPA before you sign.
Milestone funding
The lender doesn’t hand the contractor all the money on day one. Funding typically happens in two milestones:
- Milestone 1 (signing or panel delivery): Partial disbursement, often 60%–70% of the loan amount.
- Milestone 2 (Permission to Operate, or PTO): Balance disbursed when the local utility approves the system to generate.
This protects you (the contractor can’t cash out and walk) and the lender (no full funding until the system is real and operating). It’s also why solar installs that drag on for months can stall — the contractor’s cash flow is gated by PTO.
Your loan moves to a capital provider
Within months of origination, your loan is typically sold to a capital provider — a bank or institutional investor that holds and services solar loan portfolios. You’ll get a notice that your servicing has transferred. Terms don’t change; only the entity collecting your payment.
The federal tax credit, in detail
The ITC is a federal tax credit, not a rebate or refund. You claim it on your federal tax return for the year of installation (Form 5695). It reduces your federal tax liability dollar-for-dollar.
Two common misconceptions:
- “I’ll get a check from the IRS.” No. You get a reduction in what you owe.
- “I can use the full 30% no matter what.” Only if you owe at least that much in federal tax. If your federal liability is $4,000 and the credit is $10,500, you can only use $4,000 this year. The remainder typically carries forward to future years.
What can go wrong
- The promotional APR doesn’t apply. Verify the APR in the signed loan agreement matches what was quoted.
- The dealer fee was hidden. Always ask for the cash system price separately from the financed price.
- You can’t use the full tax credit. Re-amortizing loans become significantly more expensive.
- The installer goes out of business. The loan obligation stays with you even if the system isn’t fully operational.
- You sell the house. The loan doesn’t transfer automatically; it must be paid off or assumed by the buyer.
The questions to ask before signing
- What is the cash price of this system?
- What is the dealer fee, in dollars?
- Is this loan re-amortizing? If yes, what happens if I don’t apply the tax credit?
- Who originates the loan? Who will service it long-term?
- Is there a prepayment penalty?
- What are the milestone funding triggers?
- What happens if PTO is delayed?
A reputable installer answers all of these without flinching. If yours can’t, get a second opinion before signing.