If you’re interested in purchasing an aircraft whether it be for personal or commercial reasons, you’ll of course need to know a little bit about the aircraft financing process. Take the following quiz and see if you have the necessary understanding to proceed with attaining an aircraft finance loan.(1) With regards to aircraft financing for aircraft under $100,000, generally what is the loan term for, say, a 15 year amortized loan?(a) Generally, a 15 year amortized loan has a loan term of 3 years.
(b) The term for such a loan is 2 years.
(c) A 5 year term is usually imposed for this type of loan.
(d) None of the above.Answer: (c) Because most borrowers generally upgrade their aircraft after 5 years, the 5 year term is usually prescribed.(2) How long can the amortization schedule stretch on a loan for an aircraft over $100,000?(a) The length of amortization can be as long as ten years.
(b) Amortization can span over as much as fifteen years.
(c) Sometimes an amortized loan of this type can extend 20 years.
(d) Most amortized loans for aircraft over $100,000 can go as long as 30 years.Answer: (c) An amortized loan over the $100,000 mark can have a breadth of 20 years.(3) With regards to experimental aircraft financing what is generally required of a kit-built plane versus a plane that has not been kit-built?(a) FAA registration
(b) An appraisal
(c) A larger down payment
(d) A title searchAnswer: (c) If you said a larger down payment, you are correct.(4) What is an “advance fee scheme?”(a) A scheme used by some unscrupulous lenders who ask for a sizeable down payment to fund experimental aircraft.
(b) An advance fee scheme is used by some aircraft finance lenders to secure the funds needed in order to conduct a title search and valuation of an airplane.
(c) Advance fee schemes are used to lower aircraft financing rates on single engine and twin engine planes.
(d) Advance fee schemes have been used in some instances of commercial aircraft financing for turbo props that are
hard to finance. An initial fee is charged by a lender with the pledge of financing the loan if the borrower pays the “upfront” expense.Answer: (d) Beware if you’re in the market to finance any jet or turbo prop that has restrictive lending requirements. Many people have lost their money by succumbing to such a scheme.(5) What is the best type of financing to choose if you need to make significant avionic upgrades to your aircraft?(a) A 5-year fixed/adjustable rate loan.
(b) A 7-year fixed balloon loan.
(c) Experimental aircraft financing
(d) A 20-year fixed rate loanAnswer: (d) If you need to make repairs or upgrades every several years to your aircraft, this is the loan to choose.How’d you do on the above quiz? Can you improve on your knowledge with respect to aircraft financing? A little “barnstorming” session never hurts anyone.