Here’s the ABC’s, a quick summary of the most common steps, procedures and
requirements in aircraft financing... (read
While a good appraiser will inspect the aircraft and examine the log books and
maintenance history of the aircraft, an appraisal is typically not as thorough as a
comprehensive inspection... (read more)
A loan is money and money is personal, and the bigger the dollar amount and the
bigger the collateral, the bigger the opportunity for shouting and fistfights at
the closing. Here’s five tips to keep your aircraft loan closing free of both...
The first time buyer is more likely to get burned because they fall in love with
the first thing they see. Keep your emotions in check, at least until you get back
the pre-purchase inspection report... (read
Top 10 Q&A For Aircraft Loans
© Copyright D. Alan Carter
All Rights Reserved
Aircraft Loans - How much can be borrowed on an aircraft?
Lenders will vary, but in most cases you can borrow from 85% to 90% of the aircraft’s purchase price or the
appraised value – whichever is less. Keep in mind that the larger the down payment, the lower the interest rate and
the easier the credit review.
Aircraft Loans - What are typical loan rates and terms?
Interest rates can be fixed or variable, the exact rate being determined by the following:
- size of the down payment
- size of the loan (larger loans typically generate lower associated interest rates)
- simplicity of the loan (complicated corporate structures or multiple borrowers increase underwriting
- model and make of the aircraft
- age of the aircraft (vintage aircraft = higher rates)
- credit history and capacity of the borrower
When interest rates are decreasing, there is always the temptation to go with a variable rate, but a long-term
fixed rate remains the better bet if you plan to keep the aircraft three or more years.
Terms are typically 20 to 25 years, although some lenders may offer a 3 to 5 year balloon with the goal of
reducing the interest rate.
Aircraft Loans - What do I need to provide in order to start the application
Lenders will vary, but in most cases require a completed application form, a copy of the aircraft sale/purchase
agreement, a spec sheet on the aircraft in question, the last two years of your IRS tax returns, and a copy of your
driver’s license and your pilot’s license.
Most lenders are able to pre-qualify you online or over the phone in a matter of minutes. Pre-qualification lets
you know your purchasing ceiling, and provides the chance to evaluate the policies and personalities of a lender
firsthand – before making a financial commitment to pursue the loan.
Aircraft Loans - Is an appraisal required?
It depends on the lender and the aircraft. The purchase of a new aircraft typically doesn’t require an
appraisal. On used planes, the more experienced the lender is with the aircraft industry, the less likely the need
for a formal appraisal.
Many times the lender can make an accurate judgement with nothing more than a description of the aircraft,
avionics, and engine/airframe time. Other times, especially for higher loan values or for aircraft with less
familiarity, an appraisal will be ordered. It’s the lender’s call.
Read how an appraisal differs from a Pre-Buy Aircraft Inspection.
Aircraft Loans - Does the lender require aircraft insurance?
The lender will require that you maintain full ground (physical damage) and in-flight insurance for the duration
of the loan. Your lender will be named as the "loss payee" on the title. Proof of insurance will be required at the
Aircraft Loans - Should I consider setting up a corporation to buy the plane?
Lenders certainly lend to corporations and LLC’s (Limited Liability Corporations). Such loans are more
complicated to underwrite and my incur more costs, but there may be advantages from a tax and liability
perspective. The tradeoffs are best explored with an accountant or tax attorney.
Aircraft Loans - How long does it take to get an aircraft loan approved and
Lenders will vary, but one to three days is fairly routine. Many offer same-day approval and next business day
closing. Assuming, of course, all document ducks are in a row.
Aircraft Loans - What takes place at the closing?
At the closing, the loan documentation is executed and funds and title are transferred. The closing will be
handled by the lender, a title company working on behalf of the lender, or an aviation attorney working on behalf
of the lender.
Aircraft Loans - What are the closing costs?
Closing costs typically include application fee, title search fee, title insurance premium, appraisal fee (if an
appraisal was ordered), and recording and registration fees. The actual dollar amount will vary by lenders, and
should be provided and itemized prior to application.
Aircraft Loans - Who pays closing costs?
Typically, the borrower. Of course, as with most things in life, nothing is carved in stone. Depending upon the
financial strength of the borrower, the relationship of the borrower with the lender, and the overall
competitiveness of the lending industry at any given time, the borrower may be able to negotiate the allocation of
closing costs between borrower and lender.
A more thorough discussion on lending procedures can be found in the ABC's of Aircraft Financing. And for practical tips and advice from borrowers themselves,
see Aircraft Loans, Moans and Groans.
-– D. Alan Carter