The joy of flying your own bird and providing yourself with a better transportation option are often the primary objectives of private aircraft ownership. To reach this objective most of us must deal with aircraft financing...and all of us need aircraft insurance.

Here are ten factors you should take into consideration in order to help avoid unpleasant surprises and be more certain you’re getting what you want for an aircraft loan and insurance.

1. First, select a knowledgeable professional representative (aviation insurance broker and aircraft finance broker) who understands your aircraft finance and insurance needs and desires.

Aircraft Financing

2. Interest rate is always important – know whether it is fixed or adjustable and what the loan period (length) is. Lenders offer many combinations. Understand the terms of the loan before signing.

Typically adjustable rate loans are tied to a published index – check the history of the index to get a sense as to what the future may hold.

For those who anticipate only a short term need for financing, then the adjustable rate program often provides interest savings over the fixed rate option.

For those who plan to retain their financing for a long period of time, the fixed rate option provides stability and piece of mind.

3. Loan term and amortization schedule – the longer the amortization schedule the easier it will be to make the required monthly payments.

Pay attention to the aircraft loan term, which can be much shorter than the amortization schedule.

4. Fees and Loan Costs – understand the total cost to close a loan.

5. Points – lenders often offer the ability to “buy down” the interest rate on an aircraft loan – exchanging up front points to reduce the interest rate.

One point is equivalent to 1% of the loan amount. Depending upon how long the aircraft loan is outstanding determines the true interest paid when points are involved. The shorter the actual loan life the more of an impact the point has on the effective rate of the loan.

6. Prepayment – before signing understand the restriction regarding prepayment of a loan, either in full or in part.

7. Servicing – your aircraft loan payments may be to another company rather than the one who is taking your loan application. It is important to understand who will be servicing your loan after it closes.

Aircraft Insurance

8. Aircraft insurance coverage addresses three main areas of concern – liability, hull (physical damage), and medical.

Liability coverage is provided either in a comprehensive manner (“smooth coverage”) or with sub-limits (per passenger, per person, or family member limitations).

Hull coverage covers physical damage to the aircraft and is an “agreed/stated value” between the insurance company and the insured.

The medical portion is “no-fault” coverage offered as a supplement to standard medical insurance for medical expenses not typically covered otherwise.

9. Obtaining the best aircraft insurance coverage for the least cost can be achieved by maintaining currency, frequent flying in the insured aircraft or similar, participating in recurring training, advanced ratings (particularly instrument), an accident free history, complying with all regulations, etc.

10. Honesty is the best policy. It is important to provide accurate and complete information on the application requested by the insurance company – verification of all pertinent information will most likely occur before settling a claim.