Co-Signers, Co-Borrowers and Personal Guarantees on Aircraft Loans
This page is for borrowers asked to add a second signer, and for the family member, partner or LLC member being asked to sign. It explains the three roles, when lenders require them, and what the second signer is really agreeing to.
Co-borrower vs co-signer vs personal guarantor
People use these words loosely. The loan documents decide who owes what, so read the signature blocks. As the roles are generally used:
| Role | Signs the note? | On the title and FAA registration? | Liable for | Typical use |
|---|---|---|---|---|
| Co-borrower (joint applicant) | Yes | Yes, as a co-owner | The full debt, jointly with the other borrower | Spouses or partners buying together; combining two incomes |
| Co-signer | Yes | Usually not | The full debt, even without owning the aircraft | A parent backing an adult child's purchase; covering thin credit |
| Personal guarantor | No; signs a separate guaranty | No | Whatever the guaranty says, often the full debt plus collection costs | Members of an LLC or officers of a corporation that owns the aircraft |
Registration follows ownership. Every owner of record signs the Aircraft Registration Application, and co-owners appear on the certificate. A co-signer or guarantor who isn't an owner doesn't, which is exactly why their position is riskier: full liability, no ownership rights.
When lenders ask for a second signer
- An LLC or corporation will own the aircraft. A new single-asset entity has no credit or income history, so the lender looks through it to the members through personal guarantees.
- Thin or weak credit. Most aviation lenders look for 680 or higher, with the best pricing typically starting around 720–730 (NAFA). A stronger co-borrower can make a borderline file approvable.
- Income can't carry the payment. Adding a co-borrower's documented income can bring the debt-to-income ratio within the lender's limits.
- Several owners. In a partnership purchase, lenders commonly want every owner on the note or guaranty. See financing a partnership aircraft.
- Income comes from a business or trust. The lender may want the entity that generates the cash to stand behind the loan.
What a second signer doesn't fix: insurance. The insurer underwrites the pilots named on the policy. Adding a 2,000-hour co-signer who won't be flying typically doesn't change the training or hour requirements for the 100-hour pilot who will. A co-signer also doesn't fix problems with the aircraft itself, such as damage history, incomplete logbooks or an appraisal below the price.
Spouses: under the federal Equal Credit Opportunity Act's Regulation B, a lender generally can't require your spouse's signature on the note if you qualify individually. It may still ask a spouse to sign documents needed to give it a valid lien on jointly owned property under state law. Community-property states have their own rules, so ask an attorney.
Personal guarantees on LLC-owned aircraft
Owning an aircraft through an LLC is common, for reasons ranging from separating the aircraft from other assets to accommodating partners and business use. For the loan, though, an LLC rarely stands alone. Expect:
- A guaranty from each member, or from members above an ownership threshold the lender sets.
- Unlimited guaranties by default. A limited guaranty, capped at a dollar amount or a percentage of the balance, is sometimes negotiable, especially for a minority partner. Ask before the documents are drawn.
- A "guaranty of payment" rather than "of collection." Many aviation guaranties are written as absolute and unconditional, so the lender can pursue a guarantor without first suing the LLC or selling the aircraft. They also often waive notice and other defenses.
- Joint and several liability. If 3 members each guarantee a $240,000 loan, the lender can pursue any one of them for the entire remaining balance, not $80,000 each. Sorting out who owes whom is left to the members, which is why a written co-ownership agreement matters.
The LLC may still help with liability separation and tax structure. The guaranty simply means it doesn't shield you from this debt. See LLC ownership structure, and have an aviation attorney review the guaranty.
What a guarantor can actually owe: a worked deficiency example
"Guarantee" sounds abstract until the aircraft is sold for less than the loan balance. Here is an illustrative default. The loan math is computed, and the sale figures are assumptions.
| Step | Amount |
|---|---|
| Original loan: $200,000 aircraft, 15% down, 7.75% for 20 years ($1,396/mo) | $170,000 |
| Balance after 36 on-time payments, when the borrower stops paying | $157,978 |
| Interest accrued over 4 months of repossession and remarketing (assumption) | $4,081 |
| Resale price in a forced sale (assumption) | −$150,000 |
| Remarketing costs: storage, ferry, inspection, sales commission, legal (assumption) | +$12,000 |
| Deficiency the guarantor can be asked to pay | $24,059 |
The guarantor never flew the airplane and has no say in how it is sold, yet the deficiency is theirs to pay. Default interest rates and attorney fees in the documents can make it larger. State law, including the UCC Article 9 requirement that a repossessed asset be disposed of in a commercially reasonable manner, governs how the sale must be handled and what can be claimed. Ask an attorney in your state.
Not sure you need a second signer?
A Jaken Aviation financing specialist can tell you whether lenders in its network would approve the loan on your own profile, or how to structure it with a co-borrower or LLC guaranty.
Other risks to the co-signer or guarantor
- Credit reporting. A co-signed or co-borrowed loan typically appears on the signer's credit report, and a late payment by the primary borrower damages both scores. A personal guaranty of an LLC loan may not appear on the credit report, but it should be listed as a contingent liability on your personal financial statement.
- Borrowing capacity. Future lenders may count the aircraft payment against you when you apply for a mortgage or business credit.
- No control. You are exposed if insurance lapses, maintenance is deferred, or the aircraft is damaged, and a non-owner can't sell it to cut losses.
- Life events. Death, disability, divorce or a falling-out between partners can all trigger a default. The documents don't care about the reason.
How to protect yourself before you sign
- Read the guaranty itself, not the term sheet summary. Look for the cap, the waivers, and whether it covers costs and attorney fees.
- Ask whether a limited guaranty or a burn-off is available, where the guaranty shrinks or ends after a period of on-time payments.
- Put a written co-ownership or side agreement in place covering who pays, who flies, forced-sale triggers, contributions after a default, and a buyout formula. See aircraft co-ownership agreements.
- Ask to be added to the insurance policy with notice of cancellation, and review the lender's loss-payee requirements in insurance requirements.
- Get online access to the loan account or copies of statements, so you learn about a missed payment in days, not months.
- Agree on an exit plan, such as a target date or credit score at which the primary borrower refinances alone.
- Have an aviation attorney review everything. The fee is small next to the deficiency in the example above.
Getting a co-signer or guarantor released
Plan the exit before closing, because lenders rarely release a signer voluntarily:
- Refinance in the primary borrower's name alone once their credit, income or equity supports it. See refinancing your aircraft loan.
- Pay the loan off, which also releases the FAA lien.
- Sell the aircraft through escrow, so the payoff and lien release happen at closing.
- A contractual release, where the lender agrees to release a guarantor after a set period of on-time payments. This is uncommon in aircraft lending, so ask for it up front rather than expecting it later.
How this guide differs from related guides
This page covers who signs and what each signer is liable for. For the qualification standards that trigger a request for a second signer, see aircraft loan requirements and credit score requirements. For pooling cash with partners for the down payment, see aircraft down payment strategies. For choosing between sole and shared ownership, see partnership vs sole ownership. For how the underwriter will question each signer, see aircraft loan application questions.
Frequently asked questions
Can I get an aircraft loan with a co-signer?
Yes. Many aviation lenders will consider a co-borrower or co-signer when the primary applicant’s credit, income or history can’t carry the loan alone. The lender underwrites both people, and each is typically liable for the full balance. A co-signer strengthens the credit file but does not change insurance requirements for the pilot who will fly the aircraft.
What is the difference between a co-signer and a guarantor on an aircraft loan?
A co-signer signs the promissory note and is directly liable for the debt, usually without owning the aircraft. A guarantor signs a separate guaranty promising to pay if the borrower doesn’t. Many guaranties are written so the lender can pursue the guarantor without first exhausting remedies against the borrower. A co-borrower both owns the aircraft and owes the loan.
Do I have to personally guarantee a loan to my LLC for an airplane?
Usually, yes. A newly formed LLC that holds only the aircraft has no credit history or income of its own, so lenders commonly require its members to personally guarantee the loan. The LLC may still serve other purposes, but the guaranty puts your personal assets behind the aircraft debt. Have an aviation attorney review the guaranty before you sign.
Does my spouse have to sign my aircraft loan?
Not necessarily. Under the federal Equal Credit Opportunity Act’s Regulation B, a lender generally can’t require your spouse’s signature on the note if you qualify on your own. Exceptions exist: a lender may ask a spouse to sign documents needed to create a valid lien on jointly owned property, depending on state law. Community-property states add their own rules, so ask an attorney.
What happens to a guarantor if the borrower defaults on an aircraft loan?
The lender can typically repossess and sell the aircraft, then pursue the guarantor for the deficiency: the remaining balance, accrued interest and costs minus the net sale proceeds. In an illustrative example on this page, a $170,000 loan that defaults after three years leaves a deficiency of about $24,059. State law, including the UCC's commercially reasonable sale requirement, governs the process.
How do I get released as a co-signer or guarantor on an aircraft loan?
The usual routes are a refinance in the primary borrower’s name alone, which requires them to qualify independently, a payoff, or a sale of the aircraft. Contractual release clauses, such as release after a set number of on-time payments, are uncommon in aircraft lending, so negotiate any release terms before signing rather than expecting them later.