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Factors That Can Affect Your Aircraft Financing Loan Terms

Now that you’ve decided on the piston-driven, turboprop, helicopter, or jet aircraft you want to buy, it’s time to think about the best aircraft financing company where you can get the best offer.


In this article, we’ll look at the many forms of airplane loans that are available. We’ll look at some common airplane loan conditions as well as the variables that influence them.


Because buying an airplane is a big deal, be sure you know everything there is to know about airplane finance to avoid any delays in the future.

Aircraft Financing Loan

Most Common Loan Terms

  • Interest Rate

The loan’s interest rate, as well as the loan amount, is heavily influenced by the aircraft’s purchase price. Even though the aircraft serves as collateral for the loan, lenders nevertheless place a high value on a buyer’s credit score.

Usually, the expense and the interest rate are inversely proportional. The majority of airplane loans are fixed-rate. However, variable-rate agreements are occasionally available. Commercial airplane loan terms will have higher interest rates.

  • Down Payment

The quantity of your down payment may affect your ability to finance an aircraft purchase. A 15% down payment is usual for private and corporate aircraft. If your credit is good, you might be able to get away with a 10% down payment, but you’ll have to pay a higher interest rate.

If you have bad credit, your down payment may need to increase to 30%. The down payment on a commercial craft typically varies from 20% to 30%, depending on the financing duration. A larger down payment, in particular, can earn you a longer term.

  • Term and Amortization

The amortization time for a conventional airplane loan is not necessarily the same as the term. Balloon payments may be provided, such as a 20-year term with a five-year balloon payment. Aircraft constructed after 2010 have a 20-year warranty.

Older ones have maximum periods of 10 to 15 years. Commercial aircraft might have a shorter term since they depreciate quicker.

  • Monthly Payment

The payment works just like a home mortgage. Most interest is upfront. For example, you may only gain 2% equity in the first year.

If your contract specifies no prepayment penalties, you can pay off the loan at any time without triggering additional expenses. The aircraft loan terms also vary based on aircraft supply and demand.

What Affects Your Loan Terms

1. Aircraft

The identification of the aircraft is the most fundamental of the aircraft loan terms. It all starts with the type of aircraft and how it is propelled, such as piston-driven, turboprop, helicopters, and jets.

There aren’t many piston planes on the market now that were built before 1960. It’s simpler to identify and finance airplanes built after 2000 and much better if they’re less than ten years old.

You can see the make, model, and serial numbers on engines and propellers. Particularly all the essential IDs in the contract of sale.

2. Purchase Price

The amount of finance you may arrange is directly proportional to the buying price. The following are the key elements that influence airplane pricing:

  • Airframe
  • Engine Hours
  • Installed Equipment
  • Records and Airworthiness Directives
  • Damage History
  • Paint
  • Interior

3. Use

A lender wants to know that you are buying the correct plane for your needs and not more than you require or can handle. The lender also wants to grasp what you plan to do with your aircraft (personal, business, or commercial).

Part 91 aircraft are for personal or commercial use only. It generally necessitates a smaller down payment, a prolonged repayment period, and a lower interest rate. Commercial aircraft have a greater usage rate, which requires a larger down payment.

Each month, these spacecraft fly more, resulting in wear and depreciation. Lenders design airplane finance arrangements such that the owner owes no more than the value of the aircraft.

Summary

Financing an aircraft is a huge responsibility and requires great commitment. And with the right aircraft financing services, you can always find great deals that will help you overcome any factors that may affect your aircraft financing loan terms.

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