Solar-Style Loans are a special type of loan that’s common in the residential solar marketplace. The loan revolves around the customer’s expected federal tax credit (30% up to 2032), and assumes that the customer will take their tax credit and apply it towards the loan balance. If the credit is not applied, the customer’s monthly payments will increase in order to pay off the loan by the expected maturity date.
Another aspect of solar-style loans is that they have a grace period at the beginning of the loan, so that the new PV system owner does not have to make loan payments while they are waiting for their utility to give them permission to operate. During this time, interest will accrue. Aurora assumes that this is a one-month grace period, which matches popular loans on the market. If you have a loan that has more than a one-month grace period, please contact our Support team so that we can review it.
To set up a new loan, follow these steps:
- Go to the Database as an admin user
- Go to the Financing Products Section
- Click the Add Financing Product button in the upper-right corner
- Enter a new name for the financing product
- Click Add Loan
- In the loan menu, change the Loan Type to “Solar Style Loan”
a. Name - set a name that will help you select this Loan Product from a list
b. Loan Type - Make sure this is a Solar-Style loan
c. Principal - what percent of the system cost is covered by the loan. This is usually 100% for a solar-style loan
d. Dealer fee - if you want to include the dealer fee and increase the loan principal, enter the dealer fee percent here
e. Incentives apply to Dealer fee - If you entered a dealer fee, check this box if the dealer fee should be added to the system cost for calculating incentives
f. Interest is Tax Deductible - Toggle this box if the owner can deduct the interest paid on their loan from their taxable income (this is common for a HELOC or PACE financed loan)
g. Interest Rate - Enter the Interest Rate listed by the Loan Provider
h. Duration - enter the duration in months (often, a Loan Provider will offer several combinations, eg “10-year, 5.99%, 15-year, 4.99%, or 20-year, 3.99%”. Each of these should be entered as a different Financing Product)
i. Loan can have a prepayment - This toggle determines whether the ITC (income tax credit) prepayment of the loan will be completed: This will usually be completed (you should usually check the box), but if you want to present the alternate scenario where the homeowner doesn't make the prepayment and the monthly payments go up, you can either create a second Financing Product or you can edit the loan directly in the Financing Page when running simulations
j. Expected Prepayment Amount - the percent of the loan principal that is expected to be prepaid (this will generally be the value of the income tax credit)
k. Expected Prepayment Month - the month in which the prepayment is expected by the loan provider. This is usually between the 14th and 18th month of the loan (both the prepayment amount and the prepayment month should be filled out even if you are modeling the skip-prepayment scenario. If these are left as zero, this will be modeled as if no prepayment is expected)