AOPA Finance

NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, answers questions about prepaying your aircraft loan.

Question: I have been looking at several Bonanzas, but every time I start negotiations with the seller, they opt for cash buyers. Is there something I can do to get the financing in place before I negotiate the sale?

Answer: If you have an age range and purchase price in mind, it would be recommended to get pre-approved. The pre-approval will take care of the credit underwriting so that when you find an aircraft you can confidently make an offer. Closing can be completed within a few days upon signing a purchase agreement if a pre-approval is already in place. Approvals are typically valid for 90 days with the rates locked for the first 30 days. 

If you are ready to get pre-approved, please call us at 800.627.5263 and we can send you an online application to get started.

Question: Is it possible to prepay my loan?

Answer: Some lenders do have pre-payment penalties but still allow additional principal payments to be made. Typically, the pre-payment penalty is only for the first 24 months of the loan and runs about 1-1.25% of the original loan balance. Additional principal payments can be made during the time that the pre-payment penalty is in place as long as the payments are within the specific lenders’ guidelines. 

Don’t feel shy about having aircraft financing questions. It is a complicated process, and asking questions is the first step towards understanding it better. Call us if you ever have questions about the financing process, 800.627.5263.

Have questions for Adam? He is happy to answer them. Submit your questions here. Great rates. Great terms. Helpful and responsive reps. Three good reasons to turn to AOPA Aviation Finance when you are buying an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.

This article was originally published in AOPA Finance's August edition of "Adam Answers" on August 22, 2018.

NAFA member, Adam Meredith with AOPA Aviation Finance shares the differences between co-ownership and fractional ownership. 

CO-OWNERSHIP

Co-ownership is frequently what people mean when asking about fractional ownership.  If you are looking to purchase an aircraft with multiple partners, this is more commonly regarded as a partnership loan. The good news here is that there’s a lot more financing options. Lenders are comfortable financing partnerships with up to four members using standard loan structures amortized up to 20 years. Beyond four members, lenders will typically only find comfort if the partnership is operating as a flying club. We have plenty of flying club options as well, however, those typically require a larger down payment and a shorter amortization.

FRACTIONAL OWNERSHIP 

Fractional ownership, where there’s a fractional management provider like NetJets or Planesense and the company flies and maintains your “share” of the aircraft, have very limited financing options. The reason for this is that lenders are rarely able to fully secure their collateral interest in these loans. Also, making things challenging is they must assess both your personal financial situation as well as the financial health of the fractional operator. 

For the strongest fractional providers there are some options, however, financing is limited and you can expect terms of no more than five years. As an aside, if you anticipate flying more than 25 hours annually, fractional ownership can be a very cost-effective way to gain access to larger aircraft…just don’t expect to be able to fly the plane!

This article was originally published by AOPA Aviation Finance Company on September 6, 2018.

NAFA member, Adam Meredith, president of AOPA Aviation Finance Company, is an aircraft finance professional with more than 15 years lending, small business management and customer service experience. Adam is a commercial pilot with multi-engine and instrument ratings.  Ask Adam!

ADAM ANSWERS:

KARL:  I have a loan with Bank of America at over 6%.  This originated in 2008.  Is the interest rate better now & what are my chances of getting a lower rate & would it be feasible (worthwhile)?  It is a 20 year loan.

ADAM: Rates are going to be dependent on the loan amount and term of the refinance you are considering. We have a number of options that could potentially lower your rate below 6% and keeping it financed over 15-20 years. For example, a loan balance between $50,000 and $75,000, typical structures are 5.5% amortized over 15 years. If your current balance is over $75,000 then we can fix the rate over a 20 year amortization. Currently we are seeing fixed rates as low as 4.65%. The specific age and type of aircraft may also factor in to the final loan structure. Our regional account executives would be happy to discuss the best course of action to refinance your aircraft.

Example: Assuming you financed $125k in 2008 (20 yr term and 6%), your current payment should be $895/mth and you should still owe approximately $91k. If you were to refinance that loan today, your interest rate would be 1.2% less and your payment would drop to $595/mth! 

KAREN: When I am ready to take the plunge, what documentation would I need to provide in order to apply for an aircraft loan from AOPA?  I assume the usual stuff like bank docs?

ADAM: Aircraft lending is a bit different than most other loan products you are likely used to. The process and documentation is similar to that of a mortgage. Along with our signed credit application, our lenders require two years of personal tax returns and W2s. A current paystub would also be required. If you are self-employed or a business owner, additional business financials will be needed. A comprehensive list of required documentation based on your income situation can be found on our website.

Have questions for Adam? He is happy to answer them. Submit your questions here.

Great rates. Great terms. Helpful and responsive reps. Three good reasons to turn to AOPA Aviation Finance when you are buying an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.

Have a specific aviation finance question you would like to see in future articles? Submit it here, and it may be highlighted in an upcoming content piece.

This article was written by Adam Meredith and originally published in AOPA Finance on June 20, 2016.