What are solar panels and how do they work?

If you’re one of the many Aussies who dread the arrival of their quarterly electricity bills, or you’re simply looking for ways to reduce your carbon footprint, then you might be considering investing in rooftop solar panels for your home.

Rooftop solar panels are used to convert heat and light from the sun into electricity to generate power. Solar energy is a ‘greener’ alternative to other energy sources as it doesn’t produce greenhouse gases or other pollutants. It is also known to be one of the most affordable kinds of renewable energy, making rooftop solar panels a popular choice for residential properties.

Australia is said to have the highest average solar radiation per square metre of any continent in the world. So, if you’re considering solar power for your household, you may be in the right place.

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How can solar panels help my home?

There are a number of ways solar panels could be beneficial for your home. Some of these include:

1. Electricity bill savings

Depending on what type of property you live in, how many family members live under your roof and what kind of heating or cooling systems you have, there’s a chance you might be spending more than you’d like to on your energy bills. Using solar panels to generate your own power will generally allow you to reduce this expense.

You’ll likely see higher savings on your energy bills if the majority of your electricity usage happens during the day, when your solar panels are generating energy. Unless, however, you also invest in a solar battery to store excess power.

Of course, installing solar panels does come at a cost, so it’s important to do your own calculations to ensure you come out on top in the long run. One easy way to do this is to check your latest energy bill, find the current price per kWh you pay, and then use a solar power savings calculator to determine what potential financial benefits could apply to you.

2. Value added to your property

As well as saving you money on your energy bills, solar panels could potentially also make your house more valuable.

According to an Origin Energy survey of 1,003 Australians, 77 per cent think a house with solar is more valuable than one relying on traditional energy sources. A total of 57 per cent of homeowners said they would pay up to $10,000 more for a home equipped with solar, and 60 per cent would pay at least that much more for a home with both solar and a battery wall.

In addition, 55 per cent of renters said they would be willing to pay up to $10 a week more in rent for a property with solar power.

This could be welcome news, particularly for homeowners who decide to move before they have recouped the cost of the solar panels in the way of energy bill savings.

3. Environmental benefits

With electricity emissions making up a substantial proportion of Australia’s greenhouse gas emissions, switching to solar energy could be a big step towards reducing your household’s carbon footprint.

How much do solar panels cost?

After you have a gained an understanding of the potential benefits and savings solar panels could provide, it’s important to consider the installation costs.

While for many, these figures may seem like a major investment, it’s worth weighing up the expense with the savings you could make over time. Plus, there are solar panel government subsidies available that help reduce installation costs.

The price of a solar system is of course dependent on the size of the installation, which can be measured in how many kiloWatts (kW) are installed. Consider getting a personalised quote to determine what size is right for your home.

According to SolarQuotes, the approximate cost (after subsidies) of a good quality solar system installation with Tier 1 solar panels at the time of writing is:

  • 3kW : $3,500 – $5,000
  • 5kW : $4,500 – $8,000
  • 10kW: $8,000 – $12,000

How do solar power government incentives work?

The federal government provides eligible parties who choose to install solar panels with access to a financial incentive. That is, households and small businesses in Australia that install a small-scale renewable energy system may be eligible to receive a benefit under the Small-scale Renewable Energy Scheme (SRES) to help with the purchase cost.

The amount that you may be eligible to receive depends on how many solar panels you buy, where you live and when you have them installed. This SolarQuotes Rebate Calculator could help you determine the maximum financial incentive available to you.

Where can I get solar panels?

Making the decision to install a solar panel system is a big financial commitment and long-term investment, so it’s important to do your due diligence first.

Solar panels come in a range of different wattages and power levels to suit individual needs. There are a wide selection of brands available, with updated technology regularly emerging. Although some systems might look similar, they have varied levels of power, quality and reliability.

When it comes to choosing the right system, consider shopping around, get multiple quotes and make a thorough comparison. Another thing to keep in mind is that in order to be eligible for the SRES, the system must be installed by a Clean Energy Council (CEC) accredited installer. The CEC has a database of accredited installers that you can search through.

Why might I consider a personal loan for solar panels?

Solar panel installation is an expense that many may not have the savings to pay for upfront but are eager to access the benefits from as early as possible. This is where a personal loan could come in handy.

There are a number of lenders that offer environmentally-friendly products, called ‘green loans’, that can be used to fund solar panel installation.

To find the most competitive loan product for your individual financial needs, RateCity’s personal loan comparison tool might be useful.

Keep in mind when taking out a personal loan that they will always cost you in the form of interest and/or fees.

RateCity’s personal loan calculator could also help by giving you an estimate of what your repayments might look like, once you know how much you want to borrow.

Frequently asked questions

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan. However, the process is easier and faster than taking out a mortgage.

Loan sizes typically range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.

How are personal loans regulated?

Personal lenders in Australia are regulated by ASIC (the Australian Securities & Investments Commission) and must follow responsible lending rules. That means they can’t lend money without making “reasonable inquiries” about a borrower’s financial situation and ensuring the loan is “not unsuitable” for them.

Can you refinance a $5000 personal loan?

Much like home loans, many personal loans can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

What are the pros and cons of debt consolidation?

In some instances, debt consolidation can help borrowers reduce their repayments or simplify them. For example, someone might take out a $7,000 personal loan at an interest rate of 8 per cent so they can repay an existing $4,000 personal loan at 10 per cent and a $3,000 credit card loan at 20 per cent.

However, debt consolidation can backfire if the borrower spends the extra money instead of using it to repay the new loan.

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.

Check your loan’s terms and conditions before paying extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

How much can you borrow with a bad credit personal loan?

Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans, they also get loaned less money. Each lender has its own policies and loan limits, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.

Should I get a fixed or variable personal loan?

Fixed personal loans keep your interest rate the same for the full loan term, while interest rates on variable personal loans may be raised or lowered during your loan term.

A fixed rate personal loan keeps your repayments consistent, which can help keep your budgeting consistent. You won't have to worry about higher repayments if your rates were to rise. However, on a fixed loan you’ll also potentially miss out on more affordable repayments if variable rates were to fall.

What interest rates are charged for personal loans?

Lenders aren’t allowed to charge interest on loans of $2,000 and under. Instead, they make their money by charging a one-off establishment fee of up to 20 per cent and a monthly account-keeping fee of up to four per cent. Lenders might also ask you to pay a government fee.

For loans between $2,001 and $5,000, lenders can make their money in only two ways: a one-off fee of $400 and annual interest rates of up to 48 per cent.

For loans of $5,001 and above, or for loans that have terms longer than two years, lenders can charge annual interest rates of up to 48 per cent.

Those fee caps don’t apply to loans offered by authorised deposit-taking institutions such as banks, building societies or credit unions, although such institutions are highly unlikely to charge interest rates of anywhere near 48 per cent.

Are there low doc personal loans?

Self-employed borrowers may be eligible for low doc personal loans, which require less documentation in their application process than many other personal loan options.

It’s important to remember that though low doc personal loans may require less paperwork, you may need to provide additional security, or pay a higher interest rate.

Can unemployed single parents get personal loans?

It can be more difficult for unemployed borrowers to successfully apply for a personal loan. Most lenders require borrowers to have a regular income available to cover the cost of loan repayments.

If you’re self-employed, or if less than half of your income comes from Centrelink, you may not be eligible for some personal loan options. Consider contacting the lender before applying.

Which lenders offer bad credit personal loans?

Several dozen lenders offer bad credit personal loans in Australia. These are generally smaller lenders that aren’t household names.

How do I consolidate my debt if I have bad credit?

The worse your credit history, the harder you will find it to consolidate your debts, because lenders will be less willing to lend you money and will charge you higher interest rates.

However, people with bad credit histories can make debt consolidation work by following this three-step process:

  1. First, find a lender willing to give you a bad credit personal loan. This process will be simplified if you go through a finance broker or use a comparison website like RateCity.
  2. Second, make sure the interest repayments on your new loan are less than the repayments on the loans being replaced.
  3. Third, instead of spending those savings, use them to pay off the new loan.

Can I get guaranteed approval for a bad credit personal loan?

Few, if any, lenders would be willing to give guaranteed approval for a bad credit personal loan. Borrowers with bad credit histories can have more complicated financial circumstances than other borrowers, so lenders will want time to study your application. 

It’s all about risk. When someone applies for a personal loan, the lender evaluates how likely that borrower would be to repay the money. Lenders are more willing to give personal loans to borrowers with good credit than bad credit because there’s a higher likelihood that the personal loan will be repaid. 

So a borrower with good credit is more likely to have a loan approved and to be approved faster, while a borrower with bad credit is less likely to have a loan approved and, if they are approved, may be approved slower.

How do I find out my credit rating/score?

You're entitled to one free credit report per year from credit reporting bodies like Equifax, Dun & Bradstreet, Experian and the Tasmanian Collection Service. You can also get a free report if you’ve been refused credit in the past 90 days.

Credit reporting bodies have up to 10 days to provide reports. If you want to access your report sooner, you’ll probably have to pay.

What is credit history?

Your credit history covers everything to do with applying for loans. It includes the number of loans you’ve applied for, the amounts you’ve borrowed and your record of meeting repayment schedules.

How do I know if I've got a bad credit history?

You can find out what your credit history looks like by accessing what's known as your credit rating or credit score. You're also able to check your credit report for free once per year.

What causes bad credit history?

Bad credit history is caused by filing for bankruptcy, defaulting on your debts, falling behind on your repayments and having loan applications rejected. Lenders are wary of borrowers who demonstrate this sort of behaviour because it suggests they might struggle to repay future loans.

Borrowers with bad credit may find it more difficult to be approved for a loan, or they may get higher interest rates when they do get approved.

What is an unsecured bad credit personal loan?

A bad credit personal loan is ‘unsecured’ when the borrower doesn’t offer up an asset, such as a car or jewellery, as collateral or security. Lenders generally charge higher interest rates on unsecured loans than secured loans.

What is debt consolidation?

Debt consolidation is the process of rolling several old debts into one new debt, usually to save money or for the sake of convenience.

What are the pros and cons of bad credit personal loans?

In some instances, bad credit personal loans can help people with bad credit history to consolidate their debts, which can help make it easier for them to clear those debts. This is because the borrower might be able to consolidate several debts with higher interest rates (such as credit card loans) into one single debt with a lower interest rate and potentially fewer fees.

However, this strategy can backfire if the borrower spends the loaned funds instead of using it to repay the new loan. Another disadvantage of bad credit personal loans is that they have higher interest rates than regular personal loans.