Solar Loan vs Cash Purchase vs Lease — What's Best?

Once you have decided to go solar, the next question is how to pay for it. You can pay cash, take a loan, or in some cases let a company own the system on your roof. Each route changes your total cost, your savings, and whether you receive the government subsidy. Here is a clear comparison.

Quick comparison

Option 1: Cash purchase

You pay the installer the full price, and the subsidy is credited to your bank account after commissioning.

Pros:

• Lowest total cost — no interest.
• Fastest payback, typically 3–4 years for a subsidised home system.
• All savings are yours from the first day.

Cons:

• Needs a significant amount upfront, even though part of it returns as subsidy.
• Ties up money you might need for other expenses.

Choose cash if you have savings available and want the maximum return.

Option 2: Solar loan

Banks and some NBFCs offer loans for rooftop solar. Under the PM Surya Ghar scheme, public sector banks have offered concessional loans for home systems, typically collateral-free for smaller systems. You still own the system and still receive the subsidy.

Pros:

• Little upfront payment.
• Your EMI can be close to, or even below, your monthly bill savings — so the system largely pays for itself.
• You keep the subsidy and full ownership.

Cons:

• Interest adds to the total cost and lengthens payback.
• Paperwork and approval time.

A useful tip: use the subsidy, once credited, to prepay part of the loan. That reduces the interest you pay considerably.

Interest rates, limits and eligibility are set by each bank and change over time, so compare offers directly.

Choose a loan if you want solar now without large upfront spending.

Option 3: Lease or RESCO model

In the RESCO (Renewable Energy Service Company) model, a company installs and owns the system on your roof. You pay a fixed rate for each unit of solar power you use, usually below your grid tariff, for a contract period that can run 15–25 years.

Pros:

• Little or no upfront cost.
• The company handles maintenance.
• Savings from the start, since the per-unit rate is lower than grid power.

Cons:

• You do not own the system.
• The subsidy benefit generally goes to the owner, not to you.
• Your total savings are much lower than owning.
• Long contracts can complicate selling or renovating your property.
• Largely available to commercial and industrial buyers, with limited options for individual homes.

Choose a lease if you are a business with large rooftop space and no capital to spare, and ownership does not matter to you.

Which is best for a home?

For most homes, the order is simple:

1. Cash, if you can comfortably afford it — highest return.
2. Solar loan, if you cannot — nearly as good, especially when EMI roughly matches savings.
3. Lease, rarely — mostly relevant for businesses.

Whichever route you choose, compare the net cost against your savings. Our ROI guide shows how, and the savings calculator gives you a starting number.