Co-Signers and Guarantors for Aircraft Loans: Complete Guide

Understanding Co-Signers vs. Guarantors

While often used interchangeably, co-signers and guarantors have important legal distinctions:

Co-Signers

A co-signer is equally responsible for the aircraft loan from the moment it's funded. They sign the promissory note alongside the primary borrower and typically:

• Appear as co-owner on the aircraft title and FAA registration
• Have the loan appear on their credit report as their debt
• Are pursued by lenders for payment just like the primary borrower
• Can be sued for default without the lender first pursuing the primary borrower
• Have legal ownership rights to the aircraft
• Must approve any sale, transfer, or major changes to the aircraft

From the lender's perspective, both parties are equally responsible borrowers. There's no "primary" and "secondary" distinction in terms of liability. This equal standing means co-signers have more control but also more immediate risk.

Guarantors

A guarantor provides a financial backstop if the primary borrower defaults. They sign a separate guarantee agreement (not the promissory note) and typically:

• Don't appear on the aircraft title or registration
• May not have the loan appear on their credit report initially
• Are only pursued if the primary borrower defaults or fails to pay
• Don't have ownership rights or control over the aircraft
• Can't sell, use, or make decisions about the aircraft
• Have less protection since they have responsibility without ownership

Guarantors offer conditional support. They're generally contacted only after the primary borrower misses payments or defaults. However, their guarantee is still a legally binding commitment to pay the full debt if needed.

Which Is More Common for Aircraft Loans?

Co-signer arrangements are far more common in aircraft financing. Lenders prefer co-signers because both parties have equal stakes in the loan and ownership. This alignment of incentives—both parties losing the aircraft if payments aren't made—reduces risk.

Guarantors are typically reserved for business aircraft loans where one entity guarantees another's debt, or situations involving established relationships like parent companies guaranteeing subsidiary loans.

When a Co-Signer or Guarantor Makes Sense

Insufficient Credit History

Younger buyers or those new to credit may have no derogatory marks but insufficient history to demonstrate creditworthiness. A co-signer with established credit can compensate, showing lenders that a responsible party backs the loan.

This is common for pilots in their 20s and early 30s who have steady income and good financial management but haven't built extensive credit profiles yet.

Lower Credit Scores

If your credit score falls below lender thresholds (typically 680-700 for aircraft loans), a co-signer with excellent credit can qualify you for approval and better rates. The lender considers both credit profiles, effectively boosting your application.

For example, a buyer with a 650 credit score might not qualify solo, but adding a co-signer with a 760 score could secure approval at competitive rates. Learn more about credit score requirements for aircraft loans.

Insufficient Income or High Debt-to-Income Ratio

Lenders typically want debt-to-income ratios below 40-45%. If your income alone doesn't support the aircraft payment plus existing debts, a co-signer's income can be added to the calculation, improving your ratios.

Consider a buyer earning $85,000 annually with $2,800 in monthly debts. Adding a $1,800 aircraft payment would push their DTI to 65%—too high for approval. A co-signer earning $100,000 with minimal debt could bring combined DTI down to acceptable levels.

Limited Aviation Experience

Some lenders consider pilot experience in underwriting. A low-time pilot purchasing a high-performance aircraft might benefit from a co-signer with more extensive flying experience, especially if that co-signer also has strong financials.

For instance, a 100-hour private pilot buying a Beechcraft Bonanza might strengthen their application by adding a 2,000-hour instrument-rated co-signer as a co-owner. This addresses both financial and aviation risk factors.

First-Time Borrowers Seeking Better Rates

Even if you qualify independently, adding a very strong co-signer might secure better interest rates. A 0.5-1% rate reduction on a $175,000 loan saves $8,000-$16,000 over 15 years—potentially worth including a co-signer if they're willing.

Risks for Co-Signers and Guarantors

Full Financial Liability

Co-signers and guarantors are 100% liable for the debt if the primary borrower doesn't pay. If you co-sign on a $200,000 loan, you're responsible for the full $200,000 plus any accrued interest, fees, and collection costs.

Unlike a guarantor on an apartment lease where maximum liability might be a few months' rent, aircraft loans can represent hundreds of thousands of dollars. This is not a minor obligation.

Credit Impact

For co-signers, the loan appears on credit reports immediately, affecting:

• Debt-to-income ratio: The full aircraft payment counts against you when applying for other credit
• Credit utilization: The loan balance affects your overall credit utilization
• Credit score: Late payments or defaults harm your score as much as the primary borrower's
• Future borrowing capacity: The debt reduces how much additional credit you can obtain

Even if the primary borrower makes every payment on time, the loan on your credit report may prevent you from qualifying for your own home mortgage, car loan, or other financing.

Limited Control

While co-signers have legal ownership rights, they often don't have physical control of the aircraft. You're responsible for payments on an asset someone else controls and uses. This creates problematic dynamics:

• You can't ensure the aircraft is properly maintained
• You may not know if insurance lapses or if the aircraft is damaged
• The primary borrower could fly in ways that increase risk or devalue the aircraft
• You might disagree about selling or refinancing but need consensus

Guarantors have even less control—full liability without any ownership rights or decision-making authority.

Relationship Strain

Financial arrangements strain relationships. If the primary borrower misses payments, can't afford the aircraft, or handles it irresponsibly, the co-signer faces tough decisions:

• Make payments yourself to protect your credit
• Force sale of the aircraft (potentially at a loss)
• Sue your family member or friend for breach of agreement
• Watch your credit score plummet while trying to protect the relationship

These situations frequently damage or destroy personal relationships. Parents co-signing for children, siblings helping each other, or friends entering partnerships often underestimate this risk.

Protections for Co-Signers and Guarantors

Clear Written Agreements

Beyond the loan documents, create a separate co-ownership or co-signer agreement between parties addressing:

• Who makes monthly payments and when
• What happens if the primary borrower can't pay
• Who maintains the aircraft and to what standards
• Insurance requirements and who pays premiums
• Usage rights and scheduling
• Circumstances allowing forced sale
• How disputes are resolved (mediation, arbitration, etc.)
• Process and timeline for co-signer release or buyout

Have an aviation attorney draft this agreement. A few hundred dollars in legal fees now can prevent tens of thousands in disputes later.

Insurance Protections

Ensure comprehensive insurance coverage that protects both parties:

• Hull insurance covering the aircraft's full insured value
• Liability coverage protecting both named insureds
• Both parties listed as "named insureds" on the policy
• Lender named as loss payee
• Both parties receiving notice of policy changes or cancellations

Consider credit life insurance or disability insurance on the primary borrower that pays the loan if they die or become disabled. While expensive, this protects co-signers from inheriting payment obligations in worst-case scenarios.

Access to Information

Co-signers should maintain access to:

• Loan account information to verify payments are current
• Aircraft logbooks to ensure proper maintenance
• Insurance policies and declarations
• Any liens, judgments, or legal actions involving the aircraft

Some lenders allow online account access for both co-signers. If not, request regular statements or set up payment notifications so you're immediately aware of any issues.

Exit Strategy

Establish clear exit mechanisms:

• Refinance timeline: Specify when the primary borrower will refinance to remove the co-signer (e.g., after 3 years or when their credit score reaches 720)
• Buyout terms: Define how the co-signer can be bought out of their ownership interest
• Forced sale triggers: Identify circumstances allowing either party to force aircraft sale (e.g., missed payments, insurance lapse, unsafe operation)
• Right of first refusal: Give co-signers first opportunity to buy the aircraft if the primary borrower wants to sell

Benefits for Primary Borrowers Using Co-Signers

Access to Financing

The primary benefit is simple: co-signers make aircraft ownership possible when you can't qualify independently. Rather than waiting years to build credit or income, you can purchase now with a co-signer's help.

Better Interest Rates

Strong co-signers don't just enable approval—they often secure better rates. The difference between 8.5% and 7% on a $175,000 loan is approximately $21,000 over 15 years. Better rates thanks to a co-signer provide substantial savings.

Building Credit

Successfully repaying an aircraft loan builds excellent credit history. Large installment loans paid responsibly for years dramatically improve credit scores and future borrowing capacity.

A buyer who starts with a 680 credit score and co-signer might, after several years of on-time payments, achieve a 750+ score. At that point, they can refinance independently, releasing the co-signer while maintaining favorable terms. Learn about refinancing to remove co-signers.

Shared Ownership Benefits

If your co-signer is also a flying partner (parent, spouse, friend), you legitimately share ownership and use. This can make aircraft ownership more affordable through shared costs while maintaining full lender support.

How to Find and Choose a Co-Signer

Ideal Co-Signer Characteristics

The best co-signers have:

• Excellent credit (740+ credit score)
• Strong, stable income with low debt-to-income ratio
• Substantial assets and net worth
• Understanding of aircraft ownership costs and obligations
• Trust in your financial responsibility
• Ability to absorb potential financial loss without catastrophic impact
• Preferably, aviation knowledge or interest

Common Co-Signer Relationships

• Parents for adult children: Very common, especially for younger pilots making first aircraft purchases
• Spouses: When one spouse has better credit or income than the other
• Business partners: For aircraft used in business operations
• Flying partners: Friends co-purchasing for shared use
• Mentors: Experienced pilots helping protégés enter aircraft ownership

Having the Conversation

When asking someone to co-sign:

• Be completely transparent about your financial situation
• Clearly explain the aircraft you're purchasing and why
• Detail the exact loan amount, payment, term, and total cost
• Acknowledge the risks and obligations they're taking on
• Offer protections: written agreements, insurance, guaranteed buyout timeline
• Explain your plan to eventually refinance or pay off the loan
• Give them time to consider and consult their own advisors
• Accept "no" gracefully—it's a huge ask with serious implications

The Application Process With a Co-Signer

Both parties must complete loan applications providing:

• Personal financial statements
• Tax returns (typically 2 years for both parties)
• Income verification
• Credit reports (lender pulls for both parties)
• Identification and contact information
• Pilot certificates and logbooks (if applicable)

Lenders evaluate the combined financial profile. Both parties' credit scores, incomes, assets, and debts are considered. The stronger party's qualifications can offset the weaker party's deficiencies.

Both parties must sign loan documents at closing, and both are registered as co-owners with the FAA. If either party can't attend closing in person, power of attorney arrangements may be necessary.

Removing a Co-Signer

Co-signer removal requires one of these approaches:

Refinancing

The primary borrower applies for a new loan in their name only. If they now qualify independently based on improved credit, increased income, or reduced debt, the new loan pays off the old loan and releases the co-signer.

This is the most common and straightforward approach. It requires the primary borrower to meet all qualification standards solo. Read our guide on aircraft loan refinancing for details.

Co-Signer Release Programs

Some lenders offer co-signer release after a certain number of on-time payments (e.g., 24-36 months) if the primary borrower meets qualification standards. However, this is rare in aircraft lending and shouldn't be expected.

Paying Off the Loan

Obviously, paying off the loan entirely releases all parties. If the primary borrower receives an inheritance, sells another asset, or otherwise obtains sufficient funds, paying off the loan immediately releases the co-signer.

Selling the Aircraft

Selling the aircraft and paying off the loan releases both parties, though this ends aircraft ownership. This might be necessary if the arrangement isn't working or circumstances change for either party.