In 2003 when we looked at the aircraft loan market we said, “If rates go much lower, the money will be free.” Well, theyre lower. And though the money isn’t free yet, its cheap to those who can qualify. The recent financial chaos means there’s no wink-wink, nudge-nudge approval, but it also means that the surviving lenders are looking for those qualified buyers. There’s less competition in the loan market and some big players, like Sovereign Bank, have pulled out. Reselling and securitization of loans isn’t the market it once was. This means a greater reliance on equity lending-borrowing against the value of the aircraft-and tougher standards for the borrower. 
Your Credit Picture
As weve said before, evaluating your own credit is a good idea. Stats say up to three out of four personal credit reports contain some error. It may take up to two months for you to clear erroneous information. Get that process rolling right away. Privacy Guard is a reseller of credit information weve looked at in the past. There’s also the well-known Equifax.
These services offer reports, as we’ll as ongoing monitoring that will alert you if something pops up during the time youre shopping around for a loan. This is important because weve heard from lenders that banks are getting extra touchy about things like outstanding credit card debt or missed payments. Where one erroneous late payment wouldnt have tanked a deal in the past, it can now. Lenders are looking for credit scores of 700 or so these days, about 50 points higher than when we looked at this topic two years ago.
In addition to getting that squared away, expect to deliver two years of tax returns, proof of income and your personal financial statement. Cathy Nyen of Cirrus Finance told us that liquidity is particularly under the microscope. Banks want to ensure an buyer can withstand an unexpected drop in income. Take a look at your debt-to-income ratio (DTI). This is essentially all your monthly payments (including the aircraft loan) divided into your monthly income. Lenders are accepting DTIs of up to 50 percent, a bit higher than in recent years.
If youre weak somewhere on the triumvirate of credit-score/liquidity/DTI, don’t panic. Its a package deal. That said, weve heard rejection rates as high as 60 to 70 percent of applicants contacting lenders. That may reflect a number of people rolling the dice in a vain attempt to stem the outflow from overleveraged aircraft. Nyen of Cirrus says the rejection number is we’ll under 25 percent from where she sits. Dan Garelloni, president of Mile High Financial, says he sees numbers more like Nyens.
All lenders agree that getting your credit squared away early, even before you have specific aircraft in mind, is a good plan.
Newer Aircraft Easier
Where 20-year terms and 10 percent down was common even two years ago, the majority of lenders we spoke to require 15 percent. Thats 15 percent of the valuation or the agreed purchase price, whichever is lower. Many want 20 percent for new aircraft where just the first year depreciation can put a borrower underwater. Lenders still sting from many repos sold at auction. AOPA has good