Why Do Some Solar Loan Payments Jump in the 19th Month?
Summary
Because the loan was built around a large partial prepayment. The CFPB's August 2024 report on solar financing says many solar-specific loans raise the monthly payment unless the borrower prepays a big share of the principal, typically 30 percent, the presumed size of the federal tax credit. It calls re-amortization at a higher payment in the 19th month commonplace. For homes whose installation is completed in 2026, that credit (Section 25D) no longer exists.
A payment that assumes the tax credit goes to the lender
According to the CFPB, borrowers who do not receive the full 30 percent credit as a cash refund and cannot make the prepayment face a sudden and significant increase in their monthly payment. The credit is non-refundable, and households with no federal tax liability cannot claim any of it.
The report quotes consumer complaints. One borrower with a $34,000 loan was given 18 months to accumulate enough tax credits to avoid a 26 percent fee based on the loan amount. Another was told a 25-year loan carried a 1.99 percent interest rate and a 1.99 percent APR, while being charged a 26 percent upfront fee.
Here is how the numbers can play out. This is our own illustration, assuming a $39,000 principal at 1.99 percent APR over 25 years (300 payments), with the first 18 payments calculated on 70 percent of the principal. The actual formula is whatever the loan contract says.
| Period | Monthly payment |
|---|---|
| Payments 1 to 18 | about $116 |
| From payment 19, after a $11,700 (30%) prepayment | about $117 |
| From payment 19, with no prepayment (re-amortized over 282 payments) | about $169 |
Skipping the prepayment adds about $53 a month in this example, a jump of roughly 45 percent.
If the installation is completed in 2026
The IRS FAQ (FS-2025-05) treats a Section 25D expenditure as made when installation is completed and says no credit may be claimed for expenditures made after December 31, 2025. A homeowner with a 2026 completion date who signs this kind of loan would have to fund the 30 percent prepayment from savings, with no credit behind it.
The CFPB reports that solar loan terms typically run 8 to 25 years and stated APRs typically range from 1 to 7 percent, while industry data show the loans are usually repaid in 7 to 9 years because of prepayments. For home equity loans and PACE financing, the FTC lists questions such as whether the payments will change during the term, whether there is a balloon payment, and whether a lien will be placed on the home or the system.
Sources
- Consumer Financial Protection Bureau — Issue Spotlight: Solar Financing (2024-08-07)
- IRS — FAQs for modification of sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D under Public Law 119-21 (FS-2025-05)
- Federal Trade Commission — Solar Power for Your Home
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