The financial scrutiny for those involved in the transaction can be cumbersome, so this reputation isn’t without some merit. For example, individuals need to provide at least two years of personal tax returns. For business owners, add to that at least two years of business taxes and current financial statements. While traditional financing is a great fit for many, some don’t quite fit in the “traditional” box or simply want a more streamlined and efficient process.
AOPA Finance works with multiple lenders who offer traditional aircraft loans, as well as loans with a more streamlined process. These more streamlined loans are often referred to as “asset-based” or “low LTV” (Loan to Value) loans. These lenders recognize the value of transactional speed and privacy in financing and are willing to accommodate.
Traditional aircraft loans usually require a 15%-20% down payment, based on either the purchase price or the appraised book value, whichever is lower. A low LTV loan will usually require a 40% down payment. Some may go as low as 30%, but 40% is the norm.
Low LTV loans normally don’t require tax returns or business financial statements. Asking for less documentation means the lender knows less about the borrower’s financial condition, which translates into more perceived risk to the lender. Lenders tend to base their prices and loan requirements on risk. One of the easiest ways to mitigate risk in an aircraft loan is to reduce the exposure to the aircraft. With a larger down payment, a smaller percentage of the aircraft is being financed, so the risk comes back down to an acceptable level for the lender.
Low LTV loans are pretty straightforward. The lender will need to verify sufficient liquidity, a good credit history, and that the value of the aircraft aligns with the amount they’re willing to finance. Going with a low LTV loan usually cuts the underwriting period in half and significantly reduces the documentation needed. That’s a significant savings of both time and effort.
Note: If you are looking to buy a somewhat unique or uncommon aircraft, like a classic 1945 Grumman Widgeon, for instance, the traditional loan with full documentation will likely be the only route. But if you are looking to buy something like a late-model Cessna 182 or Cirrus SR22, a low LTV loan could be the way to go.
Great advice. Great rates. Helpful and responsive reps you can trust. Three good reasons to turn to AOPA Aviation Finance when you are buying or refinancing an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (800.627.5263), or click here to request a quote.
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