How Aircraft Loans Work: Terms, Collateral and the Three Types of Lenders

This guide is for pilots who have never financed an airplane and want to understand the mechanics (the vocabulary, the math and who actually lends the money) before talking to anyone about a specific aircraft.

What is an aircraft loan?

Most piston aircraft loans are fully amortizing, secured installment loans. At closing, the lender sends the loan proceeds, usually through an escrow agent, who pays the seller once your down payment and the paperwork are in place. You become the registered owner. The lender takes a security interest in the aircraft, which is recorded with the FAA Aircraft Registry so that anyone searching the aircraft's records can see it. You then make equal monthly payments until the balance reaches zero, and the lender files a release.

Two features make aircraft loans different from the car and home loans most people know. First, the collateral is registered federally with the FAA, not with a state DMV or county recorder. Second, the lender underwrites the airplane almost as closely as it underwrites you. It looks at logbooks, engine time, damage history and insurability, because the aircraft is what it recovers if the loan goes bad.

Aircraft loan terms, defined

These are the words you will see on every quote and term sheet. The example column uses the worked example below.

A worked example: financing a $150,000 single-engine airplane

Suppose you are buying a used four-seat piston single, built after 1960, for $150,000. The lender's minimum down payment for that category is 15%, so you bring $22,500 and borrow $127,500, an LTV of 85%. The loan is above $75,000, so a 20-year term is available. At a 7.75% fixed rate, which sits inside the roughly 7%–10% range lenders quoted as of September 2026, the numbers work out as follows:

• Monthly payment: $1,047 (principal and interest only)
• First payment: $823 goes to interest and only $223 to principal
• Balance after 5 years: $111,201. You have paid down $16,299 of principal.
• Balance after 10 years: $87,218
• Total interest over 20 years: $123,710
• Same loan over 15 years: $1,200/mo, with $88,523 total interest, which is $35,187 less

The amortization detail matters if you might sell within a few years. After five years on a 20-year loan, you still owe about 87% of what you borrowed. Your equity at a sale is the aircraft's market value minus that balance. Used piston-single asking prices were roughly flat year over year as of mid-2026, according to Sandhills Global, but that can change.

The table shows how the payment on the same $127,500 changes across rates and terms:

Loan amount $127,500. Principal and interest only; excludes insurance, taxes and fees. Illustrative, not a quote.

Payments exclude insurance, hangar, fuel and maintenance. For the full ownership budget see the operating cost breakdown. To model your own numbers use the aircraft loan calculator.

How the lien and FAA paperwork work

The lender's protection is the security agreement. Under the FAA's recording requirements, the agreement must name the parties, grant a security interest, identify the collateral by make, model, serial number and N-number, and carry the debtor's ink signature. The original goes to the FAA Aircraft Registration Branch, and the fee is $5 per item of collateral (the aircraft, each engine and each propeller, as applicable). AC Form 8050-98 is an optional FAA sample form; many lenders use their own documents.

After recording, the FAA returns AC Form 8050-41, the Conveyance Recordation Notice. At payoff, the lender uses it (or a signed release letter) to release the lien, and the release is recorded. Your aircraft registration is separate: it costs $5 and is valid for seven years.

The international Cape Town registry rarely applies to piston aircraft. It covers airframes type-certificated for at least 8 persons including crew, or for more than 2,750 kg of goods. Most piston singles and light twins fall below that threshold (FAA). For the document details see aircraft collateral and security agreements, and for how pre-closing searches work see aircraft lien searches.

What sets your rate, term and down payment?

Lenders price the borrower and the airplane together. The main levers:

• Credit. Most aviation lenders look for 680 or higher, and the best pricing typically starts around 720–730 (NAFA).
• Aircraft age and type. Aircraft built before 1960 may need 20% down or a shorter term. Multi-engine lenders generally want 1970 or newer, and AOPA's lenders restrict airframe time to under 10,000 hours (AOPA). Older aircraft may be financed at only 70%–75% of value.
• Loan size. The 20-year term on singles is available only on loans of $75,000 or more.
• Down payment. More equity lowers the lender's risk and your payment.
• Pilot and insurance. The aircraft must be insurable with you as pilot, and the lender will be named on the policy.
• Income and debts. The lender needs to see that you can carry the payment alongside your other obligations.

The full qualification checklist is on aircraft loan requirements. How rates are built, and what moves them, is covered in understanding aircraft loan rates.

Who makes aircraft loans: banks, credit unions and aviation lenders

Three kinds of institutions lend against piston aircraft. Their appetite varies by institution and changes over time, so treat the table as a starting point, not a rule.

Few banks or credit unions publish piston aircraft rate sheets. Most published rate ranges come from aviation finance providers such as AOPA Aviation Finance (6.99%–9.99%) and FLYING Finance, which listed certified piston rates from 7.01% as of September 21, 2026. To know your own rate you have to apply.

What a loan broker like Jaken Aviation does (and doesn't do)

Inquiries from this site go to Jaken Aviation, a division of Jaken Finance Group in Lake Zurich, Illinois. It is a loan brokerage, not a direct lender. A broker's job is to match your file to the lenders most likely to approve it on good terms, and then keep the transaction moving.

• What a broker does: interviews you about the aircraft, price and finances; identifies which lender types fit; packages the application; submits it to a national network of banks, credit unions and specialty aviation lenders; helps you compare offers; and coordinates the lender, escrow and seller through closing.
• What a broker doesn't do: lend money, make credit decisions or set the final rate. The lender does all three, and all loans are subject to lender credit approval and aircraft eligibility.
• Typical timing: pre-qualification in 1–3 business days, underwriting 1–2 weeks once there is a signed purchase agreement, and closing usually 2–4 weeks from application.

If your own bank or credit union offers aircraft loans on terms you like, going direct is a reasonable choice. A broker tends to add the most value when the aircraft is older or less common, the loan is large, or you want several lenders' offers without running the process yourself.

How this guide differs from related guides

This page explains what an aircraft loan is and how it works. For the step-by-step purchase sequence, from mission to FAA registration, see buying your first airplane. For the expensive errors to avoid, see first-time aircraft buyer mistakes. For whether you qualify, see aircraft loan requirements. For how much to put down, see aircraft down payment strategies. For deeper definitions of loan structures such as balloons and fixed versus variable rates, see loan terms explained. If you're weighing whether to borrow at all, see finance or pay cash.

Frequently asked questions