Plane Financing Criteria?

[Ever Beaumont]

I was curious if anyone could point me in the direction of good lenders you have used, or are familiar with. I have less than perfect credit with a score around 700 . One of the lender I spoke to were offering a pretty low rate, but had guidelines slightly outside of where I'm at .
730+ fico
20% down
2 years reserve payments
40% or less Debt to income

I check off all the boxes except the score for this lender, so my question is, Are all lenders pretty much the same, or are there some that are a little more lenient and offer higher interest rates. Just curious to hear about your experiences and how you went about getting financed. Thanks in advance.

 

[PaulS]

I was curious if anyone could point me in the direction of good lenders you have used, or are familiar with. I have less than perfect credit with a score around 700 . One of the lender I spoke to were offering a pretty low rate, but had guidelines slightly outside of where I'm at .
730+ fico
20% down
2 years reserve payments
40% or less Debt to income

I check off all the boxes except the score for this lender, so my question is, Are all lenders pretty much the same, or are there some that are a little more lenient and offer higher interest rates. Just curious to hear about your experiences and how you went about getting financed. Thanks in advance.

Banks, if you have the money to buy with cash, they are happy to lend to you.

 

[MuseChaser]

Everyone has different philosophies, and I don't pretend that mine is the "right" one. Having said that, and please don't take the following as any kind of personal indictment, but the only reasons I'd finance an aircraft would be...

1. Realizing a financial gain on the investment (very unlikely bordering on impossible).
2. Getting a lower interest rate than the money I already had on hand is making and will continue to make if it remained invested.
3. The plane will be used in a business and the interest and other associated costs are deductible.

Given the slightly lower than ideal credit score, one could infer that situation #2 can be ruled out, although there are plenty of other possible explanations, granted. Based upon the question and disclosure of a personal credit score, situation #3 seems equally unlikely.

Best, most pragmatic scenario would be continuing to rent, and make additional payments to yourself into an untouched account in the amount of whatever the payment on the plane you wish to purchase would be, PLUS enough to cover whatever you figure the yearly fixed and operating costs would be less the amount you are currently spending on rental. If you can't do that, you shouldn't buy a plane....financed or with cash. When you get extra disposable income, throw that in the fund, too. When you have enough money accumulated, buy a plane. At that time, you will know it will be financially possible.

I am not a "seat of your pants" kind of guy. Others are, and do whatever it takes to make financial gambles work. I guess it just depends upon your comfort level. Eyes wide open...

 

[Deelee]

Several months ago when we were going to use financing for a purchase, I went to three (maybe four?) different lenders to shop for the best rate. They were all pretty much the same - in the 5% to 5.25% range. If I remember correctly, that was for about $70k with 20% down. We ended up going with Currency Air Finance. It was nice because they took care of the escrow, title search and closing. In the end that purchase didn't happen and with the current plane we are just paying cash. Not sure what else there is to it, really. Just pick a few different lenders and start talking. All of the ones I talked to on the phone were very happy to walk through the process and answered all of my (dumb) first-time-buyer questions. I learned a lot about the overall buying process, too. So much so that now that we are just paying cash and doing a person-to-person sale, I am comfortable with the paperwork and all the registration forms that need to go FAA and state. Plus the person selling the plane is really great to work with...

Ah quick edit: The folks selling the other plane were great to work with, too. Just didn't work out for sellers and buyers... and they are on this forum so I need to clarify that

 

[Jmcmanna]

I financed my Arrow with US Aircraft Financing, and I have heard good things about Dorr.

Aircraft financing isn’t as regulated as, say, mortgage financing, but the process is similar. The biggest factors are ability to repay the loan and assets. I would think that the credit score would be less important if you have strong (liquid) assets and/or good income and low DTI. The best thing you can do is fill out applications with a few lenders and see what they say.

 

[Jamie Kirk]

820 fico and 3x in the bank the purchase price of the plane.

Only reason I financed was wanting to leverage my money. Bought a $265k plane, put $115k down, got 3.10% in September 2019.

Happy I did, used the $150k in March and April this year to buy stock which netted me over 500% gains.

Borrowing money is only smart if you make more than investing it. Don’t pay 8% interest to leave $50k in the bank making .01%

 

[Ever Beaumont]

Everyone has different philosophies, and I don't pretend that mine is the "right" one. Having said that, and please don't take the following as any kind of personal indictment, but the only reasons I'd finance an aircraft would be...

1. Realizing a financial gain on the investment (very unlikely bordering on impossible).
2. Getting a lower interest rate than the money I already had on hand is making and will continue to make if it remained invested.
3. The plane will be used in a business and the interest and other associated costs are deductible.

Given the slightly lower than ideal credit score, one could infer that situation #2 can be ruled out, although there are plenty of other possible explanations, granted. Based upon the question and disclosure of a personal credit score, situation #3 seems equally unlikely.

Best, most pragmatic scenario would be continuing to rent, and make additional payments to yourself into an untouched account in the amount of whatever the payment on the plane you wish to purchase would be, PLUS enough to cover whatever you figure the yearly fixed and operating costs would be less the amount you are currently spending on rental. If you can't do that, you shouldn't buy a plane....financed or with cash. When you get extra disposable income, throw that in the fund, too. When you have enough money accumulated, buy a plane. At that time, you will know it will be financially possible.

I am not a "seat of your pants" kind of guy. Others are, and do whatever it takes to make financial gambles work. I guess it just depends upon your comfort level. Eyes wide open...

Well I do own a transportation company, but im not buying the plane for that company. Although who knows what the future could bring. I work with high end celebrity clients on a daily basis.
Im just not much of a renter. I don't care if it cost more, or the same to own than to rent, doesn't really matter. I like having my own things. I make 250k/ year and the only thing I have is a mortgage for $2700/month so my debt to income is pretty low. Im not looking for anything super expensive, 130k-160k tops. I know I can simply apply and get the answer, I was just curious about others situation and routes they went for financing to see if it opened up any potential pathways since I know I may encounter some resistance with some lenders since my fico score isn't the highest. Just trying to educate myself from all angles. I cosigned on a girlfriends car in 2015, and when we broke up, she was suppose to continue to pay it, but didn't. By the time I found out it was 90 days late. I ofcourse took, the car, caught it up, and paid it off, but I still have that stain on my credit report which I think why my score isn't like 750+ since I have no other late payments or history. In transportation we have a variety of lenders that we use to get the deal done, and some of my cars are more expensive than the plane im looking at, so I was also seeing maybe aviation had similar less strict lenders that maybe just charge a little more.

820 fico and 3x in the bank the purchase price of the plane.

Only reason I financed was wanting to leverage my money. Bought a $265k plane, put $115k down, got 3.10% in September 2019.

Happy I did, used the $150k in March and April this year to buy stock which netted me over 500% gains.

Borrowing money is only smart if you make more than investing it. Don’t pay 8% interest to leave $50k in the bank making .01%

Agreed! Congrats! atleast its been a good year for someone lol. well on your way to sugardaddy status. thanks for the feed back, im pretty sure with a 820 score and half a mil in the bank you can buy what ever private plane you wanted.

 

[Ever Beaumont]

Several months ago when we were going to use financing for a purchase, I went to three (maybe four?) different lenders to shop for the best rate. They were all pretty much the same - in the 5% to 5.25% range. If I remember correctly, that was for about $70k with 20% down. We ended up going with Currency Air Finance. It was nice because they took care of the escrow, title search and closing. In the end that purchase didn't happen and with the current plane we are just paying cash. Not sure what else there is to it, really. Just pick a few different lenders and start talking. All of the ones I talked to on the phone were very happy to walk through the process and answered all of my (dumb) first-time-buyer questions. I learned a lot about the overall buying process, too. So much so that now that we are just paying cash and doing a person-to-person sale, I am comfortable with the paperwork and all the registration forms that need to go FAA and state. Plus the person selling the plane is really great to work with...

Ah quick edit: The folks selling the other plane were great to work with, too. Just didn't work out for sellers and buyers... and they are on this forum so I need to clarify that

That's great you were able to seal the deal. congrats.

 

[rtk11]

I like credit unions because they are a bit more lenient and lend to their members. Having said that, I went with Wings Financial Credit Union. They were pretty accommodating, had good interest rates and, while my credit is strong, my balance was high at the time. Yet they still financed my aircraft and I'm pretty happy with them. Maybe reach out to them? I think you have to be associated with aerospace or airlines to be able to join.

 

[flyingron]

The MNB/NB/MBNA/BOFA clowns that AOPA stumps for pretty much write a stock loan on any plane they can get a blue book value from. They didn't much care how much I put down.
Of course, they're servicing is about the most screwed up thing ever. It wasn't until I finally paid the thing off early that I realized this discrepency I'd been chasing for years (and they kept promissing to explain) was actually in my favor.

 

[Cervieres]

Try Scope Aircraft Finance. They’ve been great to work with, competitive rates, term, etc., and do aircraft financing only.

 

[Ever Beaumont]

Thanks definitely will check out these if the aopa stuff doesn't pan out.

 

[Sinistar]

Well I do own a transportation company, but im not buying the plane for that company. Although who knows what the future could bring. I work with high end celebrity clients on a daily basis.
Im just not much of a renter. I don't care if it cost more, or the same to own than to rent, doesn't really matter. I like having my own things. I make 250k/ year and the only thing I have is a mortgage for $2700/month so my debt to income is pretty low. Im not looking for anything super expensive, 130k-160k tops. I know I can simply apply and get the answer, I was just curious about others situation and routes they went for financing to see if it opened up any potential pathways since I know I may encounter some resistance with some lenders since my fico score isn't the highest. Just trying to educate myself from all angles. I cosigned on a girlfriends car in 2015, and when we broke up, she was suppose to continue to pay it, but didn't. By the time I found out it was 90 days late. I ofcourse took, the car, caught it up, and paid it off, but I still have that stain on my credit report which I think why my score isn't like 750+ since I have no other late payments or history. In transportation we have a variety of lenders that we use to get the deal done, and some of my cars are more expensive than the plane im looking at, so I was also seeing maybe aviation had similar less strict lenders that maybe just charge a little more.

Agreed! Congrats! atleast its been a good year for someone lol. well on your way to sugardaddy status. thanks for the feed back, im pretty sure with a 820 score and half a mil in the bank you can buy what ever private plane you wanted.

How much equity in your home? How much do you have to put down? What type of plane (fuel burn?)

A $150k plane that has a motor problem (ie rebuild) will probably be over $60k. So it's nice to have access to that much cash at any time during ownership.

A first annual can easily be 4%...10% of purchase price. So not sure if you are financing that into the loan or also need cash?

Have you found a hangar? If its $150/month it's no bid deal at your income level. But if its $700/month AND 20yr payments on $150k that over $1000/month before you even fly it or do the annual.

Let's say you fly 100hrs/yr and you need $60/hr fuel and $40/hr mx reserves then that's another $800/month.

So with a more expensive hangar you are looking at about $2000/month on loan, hangar, fuel, mx reserves.

This doesnt cover insurance yet so now maybe you are up to $2150/month. And most likely $175k after purchase and first annual. With the home loan you are right around $5000/month.

Just some numbers. You have a nice income so doable. If the plane drinks less fuel and hangars are cheap the $2150/month might be more like $1800/month.

Im surprised people are getting AC loans at rates lower than HELOC.

 

[Ever Beaumont]

How much equity in your home? How much do you have to put down? What type of plane (fuel burn?)

A $150k plane that has a motor problem (ie rebuild) will probably be over $60k. So it's nice to have access to that much cash at any time during ownership.

A first annual can easily be 4%...10% of purchase price. So not sure if you are financing that into the loan or also need cash?

Have you found a hangar? If its $150/month it's no bid deal at your income level. But if its $700/month AND 20yr payments on $150k that over $1000/month before you even fly it or do the annual.

Let's say you fly 100hrs/yr and you need $60/hr fuel and $40/hr mx reserves then that's another $800/month.

So with a more expensive hangar you are looking at about $2000/month on loan, hangar, fuel, mx reserves.

This doesnt cover insurance yet so now maybe you are up to $2150/month. And most likely $175k after purchase and first annual. With the home loan you are right around $5000/month.

Just some numbers. You have a nice income so doable. If the plane drinks less fuel and hangars are cheap the $2150/month might be more like $1800/month.

Im surprised people are getting AC loans at rates lower than HELOC.

I really appreciate this breakdown. Not worried about Annual cost. insurance, and hangar cost is negligible I have access to one for 200/ month. I think to regular people these numbers would be intimidating but I own a limousine/partybus company. One of my vehicles cost $1500/ month Insurance is another $1200/ month in insurance, parking $200/ month, Have to pay cdl driver $2000/ month, gas another $1200/ month and these kids are always breaking something and mx another $2000/ month. I do that on 4 vehicles, every month lol.These vehicles require far more maintenance and endure way more ware and tear than I think a plane does in my price range.

I also owned a aston martin db9 , my maintenance would sometimes be $30,000 when **** would go wrong but I didn't care, I felt like James bond behind the wheel lol . Anyways my point is im not worried about being able to afford the plane, im purposely buying something much cheaper than what I can actually afford. Just trying to get more info on lenders for when I purchase. $2000/ month to have my own plane and be able to fly 10 hours a month sounds perfect, my friends spend more than that on partydrugs. This breakdown however was very helpful, makes me feel more confident about my ability for ownership. I think im going to grab a 01-04 sr20

still miss them

And these limos and partybuses look great on the inside, but limo business is a true nightmare lol. people manage to break things in here and I don't even understand how.

 

[Sinistar]

Wow, the limo service sounds like far more hassle than a plane actually so you are definitely ready for somewhat similar plane mx. The only caveat being you need that signature from a IA to be compliant and legally be able to fly.

A SR20 would be an awesome first plane. And not being HP should knock down the insurance a bit .

If you dont have your PPL...first make sure you can get a medical...lots of stuff in there trips up people (dui, drugs, felonies, adhd, psych stuff...and on and on). If you have questions come back here.

Maybe learn in a Archer (low wing) and then transition to the SR20. If you absolutely know you love aviation, find a great Cirrus instructor and learn in it!. While I was learning in our old 182 another guy was learning in a brand new SR20...he soloed and finished in the same time as everyone else.

Aside. A scuba buddy of mine built up a big transmission business. I think he's owned every cool car you could own but the very latest Ferrari and Bugatti. I ask him and his girlfriend what their favorite was...she turns and looks at him and says "Dumbass here sold the Aston Martin...it was the best". He looks at me "Dude that was the sweetest car."

 

[Ever Beaumont]

Wow, the limo service sounds like far more hassle than a plane actually so you are definitely ready for somewhat similar plane mx. The only caveat being you need that signature from a IA to be compliant and legally be able to fly.

A SR20 would be an awesome first plane. And not being HP should knock down the insurance a bit .

If you dont have your PPL...first make sure you can get a medical...lots of stuff in there trips up people (dui, drugs, felonies, adhd, psych stuff...and on and on). If you have questions come back here.

Maybe learn in a Archer (low wing) and then transition to the SR20. If you absolutely know you love aviation, find a great Cirrus instructor and learn in it!. While I was learning in our old 182 another guy was learning in a brand new SR20...he soloed and finished in the same time as everyone else.

Aside. A scuba buddy of mine built up a big transmission business. I think he's owned every cool car you could own but the very latest Ferrari and Bugatti. I ask him and his girlfriend what their favorite was...she turns and looks at him and says "Dumbass here sold the Aston Martin...it was the best". He looks at me "Dude that was the sweetest car."

still my favorite, ive gotten a medical and stuff years ago and didn't have any issues, so hopefully everything should be the same. Nothings really changed in the 4 years. im in the process of doing all that stuff now while I look around, thanks for the advice. Yes the Aston martin db9 is a great vehicle. It was fun while it lasted. I got married and my family is to big for stuff like that now.