Aircraft Loans are on The Rise as More People Wish To Fly Private

When the world economy hit rock bottom in 2008, it was a massive shock to aircraft designers and buyers. 

For years following this crisis, there were reports that banks were not lending money due to an abundance of recoverable aircraft loans beforehand, which made many think they should not get involved again with purchases. 

The business jet finance market is a very competitive and evolving space. Just like the rest of the world economy, it is becoming more tightly regulated with an emphasis on safety – not just in crashes but also from fire or other disasters that could happen during flight operations. 

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The big challenge for buyers looking into purchasing new jets comes down to surfeit cash- which means there is not enough investment into this asset class.

Get an Understanding of Loans

Loans come with conditions that the borrower must meet, such as a regular repayment schedule and interest rates higher than those on your typical savings account.

Lenders make money by charging borrowers an annual percentage rate (APR), which is calculated based upon how much they lend out about what’s available at any time.

Loans come in many different forms, and they can be secured or unsecured. They might also have special terms, like commercial loans that are designed for businesses to get cash quickly. The financial world is a complex one. And aircraft financing can be no exception.

Basic Transaction Types

There are many different types of aircraft finance transactions, but they all come down to two basic prototypes:


The airline or operator of an aircraft asset (lessee) does not own the physical plane but borrows it from a third party who does in exchange for rent, during which time they have use rights while paying back this debt with interest. At signing & after that date, it will have to be returned to the lessor.

Operating Leases are often a more economical way to rent aircraft, but they come with restrictions. To make the most out of an operating lease, you need expert knowledge and guidance from someone who knows what happens in these transactions.


When an aircraft is purchased, the purchase price (or value) can be financed with loans. The lender will receive a security interest in that asset as collateral for repayment of their money. 

There is also Mortgage Financing where lessors are treated not just like owners but rather mortgagees who have obligations to keep up payments on time.

The world of finance is complicated, and aircraft financiers have to deal with even more variables than most. They could be placed in public or private markets depending on what is best for pricing – not only that, there are also different tax regimes involved, which makes things interesting.

Ultimately, the decision between Lease Financing or Mortgage financing is determined by what you use it for. This includes how much money is needed and in whose favor. 

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The Different Types of Aircraft Financing

  • Secured loan – Sometimes called “direct lending” or simply “financing.” This type of loan is when an aircraft’s financial institution lends all or part upfront for its purchase. 

This traditional amortized style, like a mortgage in some cases, can be good if you want to buy something expensive with cash but do not want to invest that much cash into one asset.

When the borrower takes the title of an aircraft, they can deduct depreciation for tax purposes. However, if the individual fails on their loan payments, then it becomes collateral that can be seized by lenders to prevent defaulting borrowers from ruining other valuable assets.

  • Capital lease – This is a finance lease where the borrower has possession of an aircraft but not a title. However, in many ways, they act as its owner. It must be capitalized on their balance sheet and can still take depreciation for tax purposes even though it’s not theirs outright yet.
  • Operating lease – The longer you keep an airplane, the greater chance that its value will decrease. It is because of how quickly technology changes and people grow tired of their investments. 

Five to 10 years seems like a more appropriate length for such instances when considering what residual-value risk entails.

Unlike traditional leases, the lender retains title to aircraft under a loan agreement. The payments made by the lessee are treated as operating expenses and not capitalized on their balance sheet for tax purposes since it would be easier if all expenses were dealt with in one place rather than separately.

You Can Rely on Financing Experts

Aircraft loans are complex, but they can be easy if you are in the right hands. Find reliable Jet financing experts in America today to purchase your aircraft.  JetLoan Capital specializes in aircraft financing and can finance older aircraft that typical lenders will not.