Solar Loans in India: What to Expect
Most banks and NBFCs in India finance residential rooftop solar at 7% to 11% per year, typically for 3 to 10
years. Under the PM Surya Ghar scheme, participating banks offer collateral-free loans for systems up to 3 kW at
concessional rates of around 7%, and many lenders also allow a home loan top-up, which is often the cheapest
route. A well-sized system usually saves more per month than the EMI costs, so the loan can effectively pay for
itself.
EMI for a ₹1 Lakh Solar Loan by Tenure (at 8.5%)
| Tenure | Monthly EMI | Total Interest | Total Payment |
|---|
| 3 years | ₹3,157 | ₹13,646 | ₹1,13,646 |
| 5 years | ₹2,052 | ₹23,096 | ₹1,23,096 |
| 7 years | ₹1,584 | ₹33,064 | ₹1,33,064 |
| 10 years | ₹1,240 | ₹48,772 | ₹1,48,772 |
A shorter tenure means a higher EMI but far less interest. If your monthly electricity saving is around
₹2,000 to ₹3,000, a 5-year tenure on a ₹1 lakh loan is usually self-funding.
Loan Inputs That Change the Picture
Before trusting any EMI figure, pin down four things with the lender:
- Reducing balance or flat rate? This calculator uses reducing balance, the honest method.
A "10% flat" quote is roughly equal to 17 to 18% reducing, nearly double the real cost. Always ask which
method a rate refers to.
- Is the subsidy financed or bridged? The subsidy arrives weeks after commissioning. Some
banks lend the gross amount and let you prepay when the transfer lands; others lend net and expect you to
bridge the ₹78,000 yourself for a while. It changes your financed amount, so set the subsidy field
accordingly.
- Processing fee: typically 0.5 to 2% upfront, not included in the EMI. On a ₹1.25 lakh
loan that is ₹600 to ₹2,500.
- A realistic system cost: pull it from the
solar panel cost calculator rather than a single vendor's
number.
Worked Example: Financing a 3.5kW System in Pune
A Pune home installs a 3.5 kW on-grid system at ₹2.03 lakh gross. The ₹78,000 subsidy leaves ₹1.25 lakh to
finance at 9% for 5 years. The EMI comes to ₹2,595 a month, with total interest of ₹30,688
over the tenure. The system generates about 395 units a month, worth roughly ₹3,200 at Pune tariffs. The loan
is therefore self-funding with about ₹600 a month to spare, and when the subsidy credit arrives the family can
prepay a chunk and finish 8 to 10 months early.
After the EMI: How to Actually Get a Solar Loan
Ranked by cost for most households:
- Scheme-linked loans: collateral-free loans for residential systems up to 3 kW at around
7%, offered by public banks under the national rooftop programme. Cheapest if your system qualifies.
- Home loan top-up: 8.5 to 9.5% for existing home-loan customers, larger amounts, longer
tenures. Usually the best route for 5 kW and above.
- Green or personal loans: 10.5 to 16%, instant but expensive; use only for small gaps.
Keep ready: last 6 months' bank statement, electricity bill, ID and address proof, and the installer's
proforma invoice. After disbursal, track generation against the
savings calculator so you know the EMI stays covered.
Common Solar Loan Mistakes
- Taking the longest tenure by default. Ten years nearly quadruples interest versus three.
Pick the shortest tenure whose EMI your savings cover.
- Comparing a flat-rate offer with a reducing-rate offer. Convert both to reducing terms
first; this calculator is your reference.
- Ignoring prepayment rules. Floating-rate loans to individuals carry no prepayment penalty;
confirm this in writing so the subsidy credit can shorten your loan.
- Borrowing against an oversized quote. Financing an unnecessary extra kilowatt costs you
interest on hardware that produces exportable units worth only ₹3 each.
How This Solar EMI Calculator Works
The EMI calculator for a solar loan uses the standard reducing-balance amortisation formula that banks use, so
the figure matches what a lender will quote for the same rate and tenure.
Loan amount = System cost − Subsidy − Down payment
EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
where P = loan amount, r = monthly interest rate, n = months
Assumptions
- Interest: reducing balance (not flat rate); no processing fee included
- Subsidy: deducted upfront from the financed amount; in practice it is often reimbursed
after commissioning, so bridge financing may apply for a few months
- Tenure: capped at 20 years, matching the longest solar-linked products
