Paying For Your CessnaFinancing
If you’re thinking about aircraft financing, now is a terrific time to get an airplane loan. Rates and terms have never been more favorable. Friendly aviation bankers are eager to help you get a loan. The major criteria that they’re looking for is very simple: Can you reliably pay them back? The approval process is quick and easy. Here’s how to get started:
1. Call one of the aircraft bankers listed below. They will obtain credit bureau reports for you and start the application process. You’ll need a credit score of at least 650, but there are exceptions if there are other strong factors in your favor. Each bank varies in its credit requirements.
2. You’ll need to furnish two years’ worth of tax returns to prove that you have adequate income to make your airplane payments and pay your existing bills.
Now, you should consider how much money you can get. Should you purchase a $25,000 Cessna 172 or a $250,000 pressurized P210? How much of an airplane loan do you qualify for?
Inside tip: Most airplane bankers want to see a debt-to-income ratio of about 45:100. In plain English, this means that the total of all your regular monthly obligations (car, house, credit-card minimums, etc.), including your proposed airplane payment, doesn’t exceed 45% of your gross income before taxes. For example, if you make $5,000 a month, your total monthly obligations shouldn’t exceed $2,250 (which includes the airplane payment); if your monthly gross income is $10,000, then it’s a maximum of $4,500 per month. There can be some flexibility in this, especially for people who are self-employed with strong business cash flow and excellent personal credit. Bankers often define excellent credit as a score of 720 or above. Knowing your credit score, income and these parameters will give you an idea of the loan size you’ll most likely be approved for.
Your interest rate, down payment and loan term will be based on your credit and the bank’s guidelines at the time of your application. Here are some industrywide examples, at this writing:
The average term for a used Cessna is 20 years. Some banks will go to 25 years for the newer, more-expensive models, and 10 years for the lower-priced, older Cessna singles (140s and $25,000-range 172s).
With the vendors listed here, the average rate on a $100,000 used Cessna single is 6.8%. A $50,000 Cessna would be about 7.35%, and for the older, $20,000- to $25,000-range Cessnas, expect about 9.5%Down payment:
Almost universally among all the listed financial sources, the down payment will be 10% to 15% with good credit.
Each bank has its own criteria for aircraft age and loan amount. Most lenders have a $25,000 minimum, but Allied First Bank in Oswego, Ill., will consider under-$25,000 airplanes; Randy Aarestad, President of Red River State Bank in Halstad, Minn., is a pilot with a program for under-$25,000 airplanes. Take advantage of some great rates and terms on airplane loans. Your dream Cessna can be in your hangar quicker than you think!
Page 6 of 7