Solar loan calculator: how to work out your monthly repayment

You do not need a lender's portal to estimate what a solar loan costs each month. The calculation is one formula, and doing it yourself shows you where the money goes: how much of each payment is interest, how much clears the loan, and what the whole loan costs. This guide gives the formula, a worked example with its assumptions stated, the spreadsheet version, and the step that matters most for a business, which is putting the answer next to the saving. For a ready-made tool, use the solar finance calculator.

The monthly repayment formula

For a standard repayment loan with equal monthly payments, the payment is the loan amount multiplied by the monthly rate, divided by one minus (one plus the monthly rate) raised to the power of minus the number of months. The monthly rate is the annual rate divided by twelve. In a spreadsheet the same thing is =PMT(rate/12, months, -amount). Lenders may add fees, use a different compounding or schedule a final payment, so treat your result as an estimate and ask for the exact figure in writing.

Worked example (assumptions, not an offer)

Assume a £60,000 loan at 9% a year over seven years. These numbers are chosen to show the method; the rate is not a market quote.

Item	Result
Monthly payment	£965
Annual repayments (12 payments)	£11,584
Interest paid in year one	£5,138
Capital cleared in year one	£6,446
Total repayable over seven years	£81,089
Total interest over the term	£21,089

Notice that most of the first payments are interest. That matters for tax: interest on a business loan is an allowable expense, but repayments of the capital are not, so only the interest line reduces your taxable profit. The equipment cost is relieved separately through capital allowances on the original cost, not on interest or charges.

Put the answer next to the saving

A repayment figure means little alone. Take the installer's estimated annual saving, subtract twelve payments, and you have the net annual cash flow before tax. The page on solar loans for small business walks through that test with a table by term and rate. If the result is negative at the term you can get, a longer term, a deposit or a different route may fit better.

What the formula leaves out

• Fees. Arrangement, broker and early-repayment fees change the true cost. Under the Growth Guarantee Scheme, upfront fees including broker fees are limited to a maximum of 5%.
• A variable rate. If the rate follows the lender's response to Bank of England decisions, your payment can move.
• Security. A personal guarantee or charge does not change the payment but changes the risk. The British Business Bank says a personal guarantee is usually required for unsecured business loans.

Questions business owners ask

How do I calculate the monthly repayment on a solar loan?

Use the standard repayment formula or the spreadsheet function PMT with the monthly rate, the number of months and the loan amount. Lenders may add fees or use a different schedule, so confirm the exact figure in writing.

Is the interest on a solar loan tax deductible?

Interest on a business loan is an allowable expense. Repayments of the capital are not, and the equipment cost is relieved through capital allowances on the original cost.

Is the example rate a real offer?

No. The 9% over seven years is an assumption chosen to show the method. Your rate depends on the lender, the term and any security.