Can You Finance a Plane? Options and Requirements

Financing an aircraft can make plane ownership accessible for many individuals and businesses. The process involves understanding specialized financial products and meeting specific criteria that differ from typical vehicle or home loans. This guide provides insight into the avenues for financing an aircraft, the qualifications lenders seek, and the steps involved in the application process.

Aircraft Financing Options

Several financial products exist for purchasing an aircraft. Secured loans are the most common, where the aircraft serves as collateral for the loan. This structure reduces risk for lenders, often resulting in more favorable terms for the borrower. While traditional banks and credit unions offer aircraft financing, specialized aviation finance companies are also prominent providers, often possessing deeper expertise.

Loan terms for aircraft typically range from 10 to 20 years, with interest rates varying based on market conditions, borrower creditworthiness, and the loan amount. Interest rates can range from approximately 4% to over 10%. Down payments are a standard requirement, commonly falling between 15% and 20% of the aircraft’s purchase price. For loans exceeding $1 million, a 20% down payment may be typical. Some lenders may offer reduced down payments for borrowers with exceptional credit, though zero-down options are generally not available.

Beyond secured loans, some specialized lenders may offer asset-based loans. These sometimes require less financial documentation but often come with higher down payment requirements, such as 30% to 40%. Conversely, credit-based loans, which require comprehensive financial disclosure, typically have lower down payment expectations. Lease financing is another option, particularly for businesses, offering the use of an aircraft without outright ownership. These often have shorter terms and higher monthly payments compared to loans.

Qualifying for Aircraft Financing

Lenders evaluate both the prospective borrower and the aircraft to determine eligibility for financing. For individuals, key factors include a strong credit history and score, generally above 700. Lenders also assess income stability and a manageable debt-to-income (DTI) ratio, which ideally should not exceed 40% to 45% including the new aircraft payment. Demonstrating adequate liquidity beyond the down payment, often equivalent to 12 to 18 months of aircraft loan payments, is also important to cover ongoing expenses like fuel, hangar fees, insurance, and maintenance.

The aircraft itself undergoes a thorough evaluation. Lenders consider its age, make, model, condition, and intended use. Older aircraft, especially those manufactured before 1960, may require larger down payments or shorter loan terms, though some lenders finance piston aircraft from as far back as 1950. The aircraft’s total airframe hours are also considered, with some lenders restricting financing to aircraft with less than 10,000 hours. Complete maintenance logbooks and a limited or no damage history are generally preferred, as these factors directly impact the aircraft’s value and the lender’s collateral risk.

An aircraft appraisal is often a required step to provide an unbiased valuation of the aircraft. This appraisal helps lenders determine the appropriate loan amount and the loan-to-value (LTV) ratio, ensuring the collateral is sufficient to secure the loan. For higher-value aircraft, typically those over $1 million, an appraisal by an accredited appraiser may be mandatory.

Applying for Aircraft Financing

Once potential borrowers understand financing options and eligibility, the application process for aircraft financing begins. This typically involves selecting a lender, such as a specialized aviation finance company or a bank with an aviation division. Many lenders offer pre-approval processes, which can help determine the maximum loan amount and lock in an interest rate for a certain period, providing clarity before committing to a purchase.

The application package generally requires a range of financial and personal documents, including:
A completed loan application.
A personal financial statement and verification of liquid assets through recent bank and brokerage statements.
The past two years of federal tax returns, including all schedules, and current pay stubs.
For self-employed individuals or businesses, two years of business tax returns and year-to-date financial statements.

Information specific to the aircraft is also necessary, such as an aircraft specification sheet, a copy of the logbook entry for the last major inspection, and an executed aircraft purchase agreement. After submission, the application moves into the underwriting phase, where lenders review the provided information, verify debts, and calculate financial ratios like the debt-to-income ratio. An aircraft appraisal and a title search are usually ordered by the lender to confirm the aircraft’s value and ensure there are no existing liens. The entire process, from application to loan closing, can take several days or longer. Upon final approval and satisfaction of all closing conditions, loan documents are prepared for signature, and funds are disbursed to complete the aircraft purchase.