Aircraft Loans 101

Everything you need to know about financing your aircraft purchase in Illinois

Jump to Section:

What Are Aircraft Loans?Types of Loans Down Payments Interest Rates Approval Process

What Are Aircraft Loans?

Aircraft loans are specialized financing products designed to help individuals and businesses purchase aircraft. Unlike car loans, aircraft financing is more complex due to:

Higher loan amounts (typically $200,000 to $2,000,000+)
Longer repayment periods (up to 20 years)
Specialized lender requirements and regulations
Aircraft valuation and depreciation considerations
Insurance and maintenance cost factors

The Federal Aviation Administration (FAA) sets standards for aircraft financing, and lenders must comply with aviation-specific regulations.

Types of Aircraft Loans

New Aircraft Purchase Loans

Financing for purchasing new aircraft directly from manufacturers. These loans typically offer:

Lower interest rates (sometimes with manufacturer incentives)
Longer loan terms
Higher loan amounts available
Warranty protection included

Used Aircraft Purchase Loans

Financing for purchasing used aircraft on the secondary market. Considerations include:

Slightly higher interest rates than new aircraft
More rigorous aircraft inspection requirements
Variable loan terms based on aircraft age and condition
Limited loan-to-value ratios for older aircraft

Refinancing

Replacing an existing aircraft loan with new financing at better terms. Good for:

Lowering monthly payments
Reducing total interest paid
Accessing equity in the aircraft
Changing loan terms to match financial goals

Down Payments

Down payments are a critical part of aircraft financing. Lenders require a percentage of the aircraft purchase price upfront to reduce their risk.

Typical Down Payment Ranges

New Aircraft:10-20% of purchase price

Used Aircraft:15-25% of purchase price

Refinancing:0-10% (equity-based)

A larger down payment can help you secure better interest rates and lower monthly payments. For example, putting down 20% instead of 10% could save you thousands in interest over the life of the loan.

Interest Rates & Terms

Aircraft loan interest rates vary based on several factors. Understanding what affects your rate helps you get the best deal.

Factors That Affect Your Rate

Credit Score

Higher credit scores (750+) typically qualify for lower rates. Scores below 650 may face higher rates or difficulty qualifying.

Debt-to-Income Ratio

Lenders prefer D/I ratios below 43%. Higher ratios may result in higher rates or smaller loan amounts.

Down Payment

Larger down payments demonstrate commitment and reduce lender risk, leading to better rates.

Loan Term

Shorter terms typically have lower rates but higher monthly payments. Longer terms have higher rates.

Aircraft Age & Type

Newer aircraft and popular models typically qualify for better rates than older or niche aircraft.

Market Conditions

Interest rates fluctuate based on federal rates, market conditions, and lender competition.

Typical Loan Terms

Short-term (3-5 years):Higher monthly payments, lower total interest

Medium-term (7-10 years):Balanced payments and interest (most common)

Long-term (15-20 years):Lower monthly payments, higher total interest

The Approval Process

Understanding the approval process helps you prepare and increases your chances of getting approved for the best rates.

Pre-Qualification

Provide basic information about your income, credit, and desired aircraft. Lenders give you an estimated amount you can borrow.

Documentation

Submit tax returns, bank statements, employment verification, and identification. This process typically takes 3-5 business days.

Credit Check

Lender reviews your credit history, score, and debt obligations. This is a hard inquiry that may temporarily impact your credit score by a few points.

Aircraft Appraisal

Lender orders an independent appraisal to verify the aircraft value. This ensures the lender isn't loaning more than the aircraft is worth.

Underwriting

Lender reviews all documents, credit, employment, and aircraft details. They determine approval, interest rate, and final terms.

Pre-Approval / Commitment Letter

Once approved, lender issues a commitment letter with all terms. You can now move forward with the aircraft purchase.

Final Approval & Closing

Before closing, lender confirms insurance, title, and all details. You sign closing documents and funds are transferred to the seller.

Ready to Get Started?

Get matched with lenders offering competitive aircraft financing rates in Illinois.

Get Your Free Quote