Understanding Solar Loan Interest Rates & EMIs

Solar energy is becoming an increasingly popular choice in India for homes, businesses and institutions due to rising electricity costs and frequent power cuts. While installing solar panels can be expensive upfront, many people now opt for solar on EMI, which lets them spread the cost through easy monthly instalments. To plan effectively, it’s important to understand how solar loan interest rates work. You should also know how EMIs are calculated and what factors can affect repayment. This guide breaks down these concepts in simple terms, helping beginners explore solar panel loan options and adopt renewable energy confidently.

What is a Solar Loan?

A solar loan is a type of green energy loan provided by banks and non-banking financial companies (NBFCs) that allows individuals or businesses to install solar panels and repay the cost in monthly instalments, also called EMIs. A solar loan works a lot like a personal loan, home loan, or even a car loan, but it’s designed especially for solar systems.

Instead of paying the full cost at once, you can opt for solar on EMI and spread the payments over a few years. This way, switching to solar becomes easier on your pocket and you can start saving on electricity bills once the system is up and running.

Solar Loan Interest Rates

The solar loan interest rate is the cost of borrowing money for the installation of solar panels. It is usually expressed as an annual percentage of the loan amount. This rate can vary depending on the lender, your credit score, the loan amount and whether the loan is secured or unsecured. For those looking to adopt renewable energy, a solar panel loan in India helps make the installation affordable.

In India, banks sometimes offer special solar loan schemes at lower interest rates, especially for residential rooftop installations. Knowing the interest rate beforehand is important, as it directly affects the monthly EMI and total repayment amount.

What Does ‘Solar on EMI’ Mean?

Solar on EMI allows you to purchase solar panels without paying the full cost up front. The loan amount is broken into small, manageable monthly payments that include both the principal and interest.

For example, if you take a loan of ₹3 lakh at an interest rate of 12% per annum for 60 months, your total repayment amount will be approximately ₹3.45 lakh, with an EMI of around ₹6,670 per month. Paying in EMIs makes solar installations more accessible for households, small businesses. It also enables large organisations to adopt solar energy without heavy upfront costs.

How EMIs Are Calculated

EMI stands for Equated Monthly Instalment, which is the fixed monthly amount you pay to the lender, including both principal and interest. The formula for calculating EMI ensures that your payments remain constant throughout the tenure.

Understanding how EMIs are calculated allows you to estimate your exact monthly outflow and manage your budget with greater accuracy when taking a solar loan.

• Loan Amount: If you borrow ₹3 lakh at a 9% interest rate for 7 years, your total repayment is spread over the tenure.
• EMI Amount: The monthly EMI for this loan would be approximately ₹4,765, covering both principal and interest.
• Financial Planning: Using online solar loan EMI calculators helps you estimate monthly outflows and plan your finances better.

Factors That Affect Solar Panels Loan Interest Rates

Several factors determine solar panels loan interest rates in India:

1. Credit Score: A higher CIBIL or credit score often results in a lower interest rate. Lenders view high scores as a sign of reliable repayment capability.
2. Loan Amount and Collateral: Secured loans, backed by property or other collateral, tend to offer better rates compared to unsecured loans.
3. Lender Policies: Different banks and NBFCs have varying policies. Public sector banks may offer concessional rates, while private institutions might charge slightly higher interest but provide faster approvals.
4. Government Schemes and Subsidies: Certain government programs and renewable energy financing schemes offer low-interest financing or subsidies, effectively reducing the cost of solar installation.
5. Loan Tenure: Longer repayment periods lower the monthly EMI but increase total interest paid over the life of the loan. Shorter tenures increase EMI amounts but reduce total interest.

Benefits of Solar Loans

Key benefits of choosing solar financing options like solar loans include the following advantages that make clean energy adoption more affordable and practical:

1. Flexible & Affordable Payments: Solar loans break down high upfront costs into manageable EMIs, with lenders offering customisable repayment plans so you can choose a tenure and structure that fits your budget.
2. Immediate Savings & ROI: Once the solar system is installed, electricity bills drop significantly, improving your ROI (Return on Investment) over time.
3. Promotes Green Energy: By financing solar installations, you contribute to India’s renewable energy goals and reduce your carbon footprint.
4. Encourages Investment in Technology: Solar loans enable homeowners and businesses to invest in efficient and modern solar technology without worrying about initial costs.

Typical Solar Loan Interest Rates in India

Here’s a table of solar loan interest rates India for different types of borrowers:

Loan Type	Interest Rate (%)	Tenure
Bank Rooftop Solar Loan (≤3 kW)	7%	6 to 120 Months
Larger Systems (>3 kW)	9 – 10%	6 to 120 Months
Personal / Unsecured Loans	10 – 12%	6 to 120 Months

Solar Loan Subsidies and Incentives in India

India offers central, state and sector-specific subsidies to lower solar installation costs and make adoption easier. Below are some of the solar loan subsidies offered in India:

PM Surya Ghar Muft Bijli Yojana (Launched Feb 2024)

The PM Surya Ghar Muft Bijli Yojana offers direct subsidies to make rooftop solar affordable for households.

• Targets 1 crore households, offering up to 300 units of free electricity monthly.
• Subsidy breakdown (one-time, directly to bank accounts):
  • ₹30,000 per kW for up to 2 kW systems
  • ₹18,000 per kW for capacity between 2 kW and 3 kW
  • Maximum subsidy capped at ₹78,000 for systems above 3 kW
• Applicants use the centralised portal; approved vendors carry out installation. Subsidy paid post-commissioning.

KUSUM Scheme (For Farmers)

The PM-KUSUM scheme supports farmers by heavily subsidising solar pumps and installations, making agriculture more energy-efficient and cost-effective.

• Under PM-KUSUM, farmers get up to 60% subsidy on solar irrigation pumps or grid-connected setups.
• Often paired with an additional 30% support as a loan, with farmers covering the remaining 10%.
• Encourages solarisation of agricultural operations and energy generation on unused land.

State-Level Subsidies & Incentives

Several states complement the central subsidy with their own rooftop solar incentives, reducing upfront costs even further.

• Maharashtra: Offers 25% state subsidy (up to ₹1 lakh) for residential rooftop systems under MJPMJAY stacked atop central MNRE (Ministry of New and Renewable Energy) subsidy.
• Uttar Pradesh: Offers ₹15,000/kW (below 3 kW) and ₹12,000/kW (above 10 kW) for residential, institutional and industrial systems via UPNEDA.
• Gujarat: Offers ₹20,000/kW (capped at ₹1 lakh) plus 3% interest subvention on loans for rooftop solar.

Choosing the Right Loan and EMI

Choosing the right solar loan can make a huge difference. A lower interest rate reduces your overall cost, while a longer tenure cuts down your EMI but increases the total interest you’ll pay. Here’s what to keep in mind:

• Check your CIBIL score: The better your score, the better your chances of getting a low-interest loan. If it’s not great, work on improving it before applying.
• Look beyond just interest rates: Focus on the APR (Annual Percentage Rate), which is the real cost of borrowing.
• Apply subsidies first: Knock off subsidies from the loan principal before calculating EMIs. That way, your repayment burden instantly drops.
• Use EMI calculators: Evaluate different tenure options to identify the most suitable repayment schedule for your budget.
• Compare lenders: Avoid finalising the first option without comparing alternatives. Check out public banks, private banks and NBFCs each comes with different rates and approval speeds.
• Watch out for hidden charges: Processing fees, prepayment penalties and foreclosure rules can quietly add up, so read the fine print carefully.

FAQs

1. What is the interest rate for solar EMI?

Solar EMI rates in India usually range between 7% and 15% per annum. The exact rate depends on the lender, credit score, loan amount and tenure.

2. What is the interest rate for a solar loan?

Solar loan interest rates generally vary from 6.5% to 12% per annum. Secured loans, government-subsidised schemes and small rooftop installations often enjoy lower rates.

3. Is a subsidy available with loans?

Yes, under MNRE schemes, the subsidy reduces the principal before EMI calculation.

4. What credit score is needed for a solar loan?

Most lenders prefer 700+, though some NBFCs accept lower with higher rates.

5. What fees should I expect?

Generally, lenders charge processing (0.5%–2%), foreclosure (2%–4%) and late fees. Before applying for a loan, you should always check the APR.

6. What is the maximum tenure for a solar loan in India?

Most solar loans come with a repayment period ranging from 6 months to 10 years (120 months), depending on the bank or NBFC.