Current loan rates

MIFlyer said:
sweet... I feel a trip to the casino. LOL.

No, good to know though for options. This is seriously better than an AC loan IMO, and you could always just pay it off if the interest rate isn't favorable.
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How? You can pay off your aircraft loan early also.

Why would you pay 2 - 3% more to not put the lender on the title????
 
Pinecone said:
How? You can pay off your aircraft loan early also.

Why would you pay 2 - 3% more to not put the lender on the title????
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Prepayment depends entirely on the lender. While most will allow it without premium, some may impose prepayment penalties (if you payoff before scheduled maturity, you owe them a lump sum payment to make up for the lost interest).

Also, there's a lot to be said for convenience, flexilibilty, etc. A 2% difference over a 10 year $70k loan is about $70/mo, or about $8k total over the 10yr life of the loan. Not chump change, but for someone trying to buy an airplane that traditional lenders may look sideways at, it's a no-brainer.

A traditional lender is going limit what you can buy, how much they'll loan against it, and, depending on the lender, the application process is measured in weeks not hours/days. Then you get to pay, in some cases, for an appraisal, escrow fees, title fees, etc. Or you pay a little more interest and totally streamline the process.
 
Pinecone said:
How? You can pay off your aircraft loan early also.

Why would you pay 2 - 3% more to not put the lender on the title????
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Being able to buy in cash and make things easy on the seller.

Being able to avoid hull insurance will save much more than the interest difference


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MIFlyer said:
Being able to buy in cash and make things easy on the seller.

Being able to avoid hull insurance will save much more than the interest difference
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Assuming you can take the loss.

You take $100,000 cash and buy it. And you crash it first flight. Without insurance, you are out $100,000.

Great if you can take that hit.
 
Pinecone said:
Assuming you can take the loss.

You take $100,000 cash and buy it. And you crash it first flight. Without insurance, you are out $100,000.

Great if you can take that hit.
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If it saves 7k a year, that’s 7% difference in interest rates. It’s not for every situation but has some cases where it does.

Even with full insurance there are tunes that bring a cash buyer could save you note on the deal than the small difference in interest. It’s just another option


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Some more color on a recent acquisition. We did 300k loan at 5.49% 20 yr amortization. 20% down. This is held in our business, sometimes that helps , sometimes that hurts depending on your term, collateral, etc.
 
MIFlyer said:
If it saves 7k a year, that’s 7% difference in interest rates. It’s not for every situation but has some cases where it does.

Even with full insurance there are tunes that bring a cash buyer could save you note on the deal than the small difference in interest. It’s just another option
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How is not insuring a $100K airplane going to save $7K per year?

And again, not insuring exposes you to a total loss. The risk starts the day you buy the plane.
 
Not sure if this warrants its own new thread - but are these companies generally willing to finance a loan for a student who wants their own plane?

All else is in order, credit history, finances, down payment, etc.

Will likely be a light sport/experimental if that makes a difference.
 
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I even heard of someone recently borrowing against their 401K to buy a plane in cash..

The story I was given was that you were taking a loan against yourself which is better than taking a loan from someone else, and since everyone's 401K is in the garbage you are paying it back when it's low.. or something like that, I couldn't totally follow since the idea of borrowing against 401 to buy a toy seemed insane to me.. but maybe it has merit??
 
Tantalum said:
I even heard of someone recently borrowing against their 401K to buy a plane in cash..

The story I was given was that you were taking a loan against yourself which is better than taking a loan from someone else, and since everyone's 401K is in the garbage you are paying it back when it's low.. or something like that, I couldn't totally follow since the idea of borrowing against 401 to buy a toy seemed insane to me.. but maybe it has merit??
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I wouldn't want to do that, personally. If you think the market is comparatively low now, then you're selling low when the loan is initiated. Ideally one would have taken the money out at market peak, then paid it back when the market is lower. But timing the market for us market amateurs is generally not a sound method of investing.

Say that you take a chunk of money out now, when the market has lost two years of gains. How long will you be paying back the loan? 5 years? 10? Historically the market increases over time, and especially when talking about decades at a time. So you're selling now at a down point, then as soon as the market goes back up, you are getting fewer shares per dollar than if you had just kept the money in.
 
Tantalum said:
I even heard of someone recently borrowing against their 401K to buy a plane in cash..

The story I was given was that you were taking a loan against yourself which is better than taking a loan from someone else, and since everyone's 401K is in the garbage you are paying it back when it's low.. or something like that, I couldn't totally follow since the idea of borrowing against 401 to buy a toy seemed insane to me.. but maybe it has merit??
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No, it has no merit. It is insane on so many levels it makes my head hurt.
 
just about the only scenario where it would make any sense at all is if your 401k balance is waaaaaaaaaaaay higher than you need.... and you have lots of other assets.
 
Baked Potato said:
Not sure if this warrants its own new thread - but are these companies generally willing to finance a loan for a student who wants their own plane?

All else is in order, credit history, finances, down payment, etc.........
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Yes, it can be done. I am a student and just bought a 2000 182-S. I put down a little over 1/3 of purchase, financed the rest (actually purchased all cash and did the financing after the close since the deal was predicated on a all cash buy). No issues with not having a PPL yet. IIRC the minimum down payment was 15% (would have been 20% or more on an older a/c). I got a 4.5% rate for 15yrs. Currency aviation financing handled it. I highly recommend their services. The rep was Kathy Mayotte. Insurance is where the student pilot status comes into play. I will be paying about $5K until I get my license and will get better with IR/hours. I can live with that.
 
It depends on how the 401K loan is structured.

I am Fed Gov, so have TSP. If I borrow from my TSP, I pay a rate equal to the Gov Security interest rate, but I pay that to my TSP fund. So I am paying the interest to myself.
 
Pinecone said:
It depends on how the 401K loan is structured.

I am Fed Gov, so have TSP. If I borrow from my TSP, I pay a rate equal to the Gov Security interest rate, but I pay that to my TSP fund. So I am paying the interest to myself.
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....and you are missing out of the market....either evaporating principle or missing the run in the C fund.
 
Pinecone said:
...So I am paying the interest to myself.
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True, but I believe the larger issue is you're exchanging stock market returns for a nominal interest rate. Over a long period, this is a big deal. Another drawback I've heard is, if terminated, you have a short period of time to come up with the funds to repay the loan.
 
Mahneuvers said:
True, but I believe the larger issue is you're exchanging stock market returns for a nominal interest rate. Over a long period, this is a big deal. Another drawback I've heard is, if terminated, you have a short period of time to come up with the funds to repay the loan.
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For Fed TSP, yes, but at times the smart place to park the money is the G fund anyway. :D I was VERY happy I was busy and had all my TSP in the G fund in 2008. :D

If you do not repay the loan within the stated time if you retire, quit, or are terminated, it becomes taxed as a distribution.

But really, how many Federal workers get terminated?? :D

Yes, they do, but it is a lot more rare that private industry.
 
MIFlyer said:
Being able to buy in cash and make things easy on the seller.

Being able to avoid hull insurance will save much more than the interest difference


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This is a fundamental misunderstanding of the concept of insurance. Not an uncommon misunderstanding given what health insurance has become in society, but insurance is about shifting and distributing risk. There is a cost/price for that. There is also a benefit that people who see it as a simple period cost completely miss.
 
aggie06 said:
This is a fundamental misunderstanding of the concept of insurance. Not an uncommon misunderstanding given what health insurance has become in society, but insurance is about shifting and distributing risk. There is a cost/price for that. There is also a benefit that people who see it as a simple period cost completely miss.
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I understand what you're saying, but there are distortions in markets that you can take advantage of.

I've often found that having cash and being a cleaner transaction gets you a better deal and better terms than having to include others in the negotiation. Also, the insurance market is really tight right now, so they're not even writing ground liability or not in motion policies for some of us. That's just crazy, they don't have any differentiated risk based on pilot experience or airplane type! A 172 owned by a 15,000 ATP blowing off the tiedown in a windstorm and hitting another plane is roughly equal in probability and damage to the other plane as them insuring a 3 hour student's 172 against the risk of blowing over into another plane. It just doesn't make sense. I get their reticence to insure lower time pilots in retracts and twins for comprehensive, the chance of a gear up is too high, and they've had to total too many hulls, but for not in motion ground, who cares?
 
Baked Potato said:
Not sure if this warrants its own new thread - but are these companies generally willing to finance a loan for a student who wants their own plane?

All else is in order, credit history, finances, down payment, etc.

Will likely be a light sport/experimental if that makes a difference.
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Lightstream is known for not asking a lot of questions or requiring a lien. You generally pay for that in interest rate, however.
 
Pinecone said:
How is not insuring a $100K airplane going to save $7K per year?

And again, not insuring exposes you to a total loss. The risk starts the day you buy the plane.
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Wait, I know this one.
By not paying $7k/yr hull loss insurance for a plane you aren't going to wreck.
Insane if you're like my significant other who thinks it's okay to text and drive because she has insurance.
But if I've been flying 25 years and never scratched a plane I start to look at hull loss insurance as if I'm throwing money on the table at Vegas (where the house always wins). Let's see, $7k/yr times 25 years would buy a pretty nice plane - for cash.
Not for everyone, but not a crazy concept.
 
Checkout_my_Six said:
....and you are missing out of the market....either evaporating principle or missing the run in the C fund.
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True if the market is making money. I borrowed some from my 401k in 2008 and people around me gave me that advice. Then I watched them all lose 40% of their retirement (because buy and hold, think long term, etc). I paid myself 3% on the borrowed money and it was all back in place by the time the market gained any strength. I don't feel like I missed anything.
 
Yup…it works both ways.
aftCG said:
True if the market is making money. I borrowed some from my 401k in 2008 and people around me gave me that advice. Then I watched them all lose 40% of their retirement (because buy and hold, think long term, etc). I paid myself 3% on the borrowed money and it was all back in place by the time the market gained any strength. I don't feel like I missed anything.
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I'm not inclined to bet against the US economy which a 401K loan essentially is. However, given reckless fiscal and monetary policy of late, at some point the golden goose can withstand no more. Let's hope the USD can hold on as the world's reserve currency otherwise the 401K loan folks will look like geniuses.
 
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I look at is as I am getting a better rate by 2-3%. I might lose a few percent, but it is less than paying a normal loan.

You just have to make sure you pay it back before you retire. :)
 
PaulS said:
This economy is tanking like its the late 70s. The strategic oil reserve release is going to end at the end of October, I wonder why that date was picked? Anyway oil prices will go up, especially if it's a cold winter, then things will really spiral. Time to hunker down.....
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Oh SURELY that date has NOTHING to do with the election! SURELY not!

The saddest thing is that most people haven’t even the vaguest idea why there is a strategic reserve and what it’s supposed to be used for.

To your other point; yes IMHO now would not be the ideal time to take on a long term loan for something like an airplane or a boat.
 
Pinecone said:
I look at is as I am getting a better rate by 2-3%. I might lose a few percent, but it is less than paying a normal loan.

You just have to make sure you pay it back before you retire. :)
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The last sentence is REALLY important. I see people carrying debt into retirement and wonder just what they’re thinking. I have some really good pension income and without debt I’m very comfortable. Add debt to it of any significant level and it would take the relaxation out of my retirement.
 
It is not carrying debt into retirement, if you plan properly.

It is carrying a loan against part of your retirement. The remaining balance is treated at a cash payment to you and subject to taxes, and it reduces the amount in that fund for you to have for retirement.

And your individual situation can make things different. I have no children and no wife. And virtually no living relatives. So I want to die with $0 and all the debt I can accumulate. :D
 
Terry M - 3CK (Chicago) said:
@robin ardoin congratulations on the new bird! So much more freedom and flexibility as the sole owner.

For your Currency Aviation loan - do they have a lien on the plane, or no?

I wonder if the rates/ease changes on a 1978 Skylane vs. 2000.

Congratulations.
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Yes, a lien for $200K.
 
Pinecone said:
It depends on how the 401K loan is structured.

I am Fed Gov, so have TSP. If I borrow from my TSP, I pay a rate equal to the Gov Security interest rate, but I pay that to my TSP fund. So I am paying the interest to myself.
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I took from my TSP because I had to. The market tanked and I would have lost my shirt but because it was locked up in my personal loan I was ok. You bet that I did everything possible to pay it off during the downturn and yes, my account rocketed when things recovered. I wouldn't try playing the market but years ago I got lucky. Not like when I doubled my money and sold my 1000 shares of Amazon at $8. Man, I thought I made a killing...
 
bradg33 said:
As noted, loans for older, "inexpensive" aircraft are not particularly easy to come by. Rates are high, the application process sucks, full of fees, and it's just a painful experience.

In the $50-100k range, you'll save yourself a LOT of trouble by going to Lightstream. Rates may be a point or two higher, but it's an unsecured loan, no prepayment penalties, etc. Application take 5-10min, nearly instant approval and money in your bank account next day. Now you're a cash buyer.
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Hmm, too bad I didn't see this a few months ago. Couldn't get an aircraft loan to save my life, but got a new motorcycle loan in 30 seconds with a payment almost three times the estimated payment of the plane.
 
bflynn said:
Does anyone have resources for current aircraft loan rates? Probably 50-100k, but I can't find anyone that will talk rates and terms without giving out information and I'm still in planning phase.

If you have a source or can just let me know terms, I'd appreciate it.
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Call Red River State Bank
 
Skip Miller said:
Newspaper this morning reported first mortgage rates on a single family home at over 6%. Wow!

-Skip
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That ain’t nothing! Our first home in 1983, 12% on a fixed 30 year. Took a while but finally got it down to 6.25%.
 
Rcmutz said:
That ain’t nothing! Our first home in 1983, 12% on a fixed 30 year. Took a while but finally got it down to 6.25%.
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You did well. We were happy to get 13.5% in 1984.

Just did a refi a couple of year ago at 2.125%. WOOHOO
 
Another vote for lightstream, have used them twice, super simple both times.
Most recently for an antique taildragger with value less than $25k. These are almost impossible to finance with the traditional lenders, and the few that would consider it were a full 1-2% higher than lightstream, with closing fees in addition.

Note: lightstream often has tiers for rates, with best rates in the 25-50k price range. I pulled more than i needed to get better rates and immediately made a large lump sum payment back.
 
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