Aircraft Financing Loans: What You Need To Know

By Rebecca Lake. May 7th 2016

If a love of flying has prompted you to consider purchasing your own airplane or you’re interested in securing a private aircraft for your company, there are several things to consider before making the leap. One of the primary concerns associated with purchasing an airplane is how to pay for it. Unless you’re fortunate enough to have substantial cash savings to cover the cost, you’ll likely have to pursue an aircraft financing loan to cover the cost. Airplane loans are similar to both car loans and mortgage loans in some respects and it’s important that you understand how aircraft financing works before you begin the process.

Choosing A Lender

The first step in securing aircraft financing is to research the different lenders who offer these types of loans. Airplane loans are offered through a number of different entities including professional pilot associations, private commercial lenders and traditional banking institutions. Each lender will have different requirements regarding the amount you may finance, how much of a down payment is required and the length of loan terms available. Your choice of lender should reflect the type of financing best suited to your financial situation.

Different lenders may also have specific guidelines as to what type of aircraft they offer financing for so it’s important to ensure that a prospective lender handles the type of loan you’re seeking. Financing may also be limited based on your geographic location or the age of the aircraft. For example, the Aircraft Owners and Pilots Association (AOPA) does not offer financing for any aircraft that is more than 50 years old, nor do they offer financing for jets that are more than ten years old. Other companies, such as the National Aircraft Finance Company (NAFCO), do not impose an age limit on aircraft financing. It’s also important to note that some companies extend financing only for personal use while other organizations deal exclusively with corporate purchases.

Qualifying For An Aircraft Loan

The qualifications for an aircraft loan vary from lender to lender but generally, you must meet several basic requirements in order to seek financing. Depending on the lender, you must be a U.S.citizen or a permanent resident to qualify for aircraft financing. You must also have sufficient income to sustain the monthly payments associated with an aircraft loan. You can calculate a rough estimate of your monthly payment using the amount you plan to borrow, the estimated interest rate and the loan term you’re seeking. Depending on the lender you choose, you will also need to have a down payment of 10 to 20 percent. In addition to your income, aircraft financing lenders will also look at your credit history to evaluate your overall credit risk. If you’re applying for an aircraft loan with one or more co-borrowers, the lender will also require their personal financial information before making a decision as to whether to extend financing.

Application Process

Once you’ve researched lenders and evaluated your financial situation to ensure that you can sustain an aircraft loan payment, you can begin applying for financing. Some lenders require a paper application while others will allow you to submit your information electronically. When completing your application, you’ll need to provide copies of your tax returns for the prior year. If you’re self-employed, you may be required to provider personal and business returns for the past two years. You may also need to provide copies of your current pay stubs and complete financial statement detailing your assets and liabilities including the value of any stocks, bonds, property or other assets you own.

In addition to providing your personal financial information, you will need to furnish some specific information about the aircraft you’re attempting to finance. This includes an appraisal of the aircraft’s value, a document detailing the aircraft’s specifications and a statement outlining your previous experience owning or operating an aircraft. Once your lender receives your completed application, they will conduct a title search to ensure that there are no existing liens against the airplane. If the title is clear, the lender will go over your application and in most cases, you will receive an approval decision within a few days.

Registration And Insurance

Once your application for financing is approved, there are several additional steps you need to take in order to take possession of the aircraft. Before the loan can be funded, you’ll need to provide a bill of sale to the lender. You’ll also need to provide proof of insurance to the lender. Generally, lenders will require you to take out a policy that lists them as the Loss Payee. The policy may also need to include a Breach of Warranty endorsement as well as a 30-day cancellation notice clause.

After providing proof of insurance and funding the loan, you will then be required to register your aircraft with the Federal Aviation Administration (FAA). In order to register your plane, you must complete an application and provide a copy of the bill of sale. Aircraft registration applications are only available by contacting the Aircraft Registration Branch or the Flight Standards District Office nearest to where you live. Once your aircraft is registered, you’ll need to update your registration periodically.

Securing an aircraft financing loan can be just as stressful as applying for a home loan but it can be equally rewarding. If you’re ready to fly the friendly skies, an airplane loan can help turn your dreams into reality.


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