Plain-English definitions for the loan, insurance, and aircraft-condition terms you’ll run into while shopping for an aircraft loan — from AFTT to wire fraud verification. 142 terms, updated regularly.
A 1031 exchange lets you defer capital gains tax by rolling proceeds from one asset into a similar one. Since the 2017 Tax Cuts and Jobs Act, this treatment applies only to real property, so aircraft and other personal property no longer qualify for like-kind exchange deferral. If you're weighing the tax impact of selling one airplane to buy another, this is a conversation for your CPA or tax attorney, not a feature FLYING Finance can build into your loan.
This is the final test flight a buyer (or their representative) takes before signing off on delivery, confirming the aircraft performs and handles as expected. It's the last checkpoint before funds are released, so lenders often want written confirmation the acceptance flight went cleanly. Any squawks discovered here typically get resolved before closing or are credited back to the buyer.
Automatic Dependent Surveillance-Broadcast is the GPS-based system that reports an aircraft's position to air traffic control and other aircraft, and it's required equipment in most controlled U.S. airspace today. Lenders and appraisers note whether an aircraft has compliant ADS-B Out installed, since a plane needing the upgrade carries an added cost that can affect your offer price and, in turn, your loan amount.
AFTT is the total number of hours the airframe itself has flown since it was built, regardless of how many engines or overhauls it's had along the way. It's one of the first numbers underwriters and appraisers look at, since a low-time airframe on a well-maintained aircraft generally supports a stronger valuation and easier approval than a high-time one. You'll find this figure recorded in the aircraft's logbooks.
This is an insurance policy where you and the insurer agree on the aircraft's value up front, so in a total-loss claim you're paid that set amount rather than a depreciated market estimate. It's the standard structure for most piston and turbine aircraft insurance and matters to your loan because lenders typically require coverage at or above the outstanding loan balance. Getting the agreed value right protects both your equity and the bank's collateral.
A broker represents a buyer or seller in an aircraft transaction, helping source listings, negotiate price, and coordinate inspections and paperwork. A good broker can also help you understand fair market value before you commit to a purchase price, which is useful information when you're applying for financing. Brokers typically earn a commission from the sale, so it's worth clarifying up front who they represent in the deal.
Aircraft title refers to legal ownership of the airplane, established through a documented chain of bills of sale going back to the aircraft's manufacture. A title search confirms that chain is clean and that no liens, judgments, or ownership disputes are attached before a lender will fund your loan. Think of it as the aviation equivalent of a home's title report, just as essential before you can close.
This FAA document certifies that an aircraft meets its approved design and is in condition for safe operation. It stays with the aircraft (not the owner) and is one of the documents a lender and title company will confirm is in order before closing. Without a valid airworthiness certificate, an aircraft generally can't be legally flown, insured, or financed.
An AD is a legally mandatory FAA notice requiring an owner to inspect, repair, modify, or sometimes replace a part or system, usually to address a known safety issue. Whether an aircraft's ADs are up to date is a core piece of underwriting, since open or improperly documented ADs can affect both value and insurability. Your pre-buy inspection should confirm full AD compliance before you finalize financing.
Amortization is simply the schedule by which your loan payment is split between interest and principal over time. Early payments lean more heavily toward interest, with more going toward principal as the loan matures. Understanding your amortization schedule helps you see how quickly you're building equity in the aircraft and what payoff would look like at any point in the loan.
U.S. certified aircraft must undergo a thorough inspection every 12 calendar months by an authorized mechanic to remain legally airworthy. A current, clean annual is something lenders and insurers both check for, and a lapsed one can delay or derail closing until it's completed. Ask sellers for the most recent annual inspection sign-off early in your search.
An aircraft appraisal is a professional's written opinion of value, based on the specific airplane's equipment, condition, history, and market comparables. Lenders typically require one to confirm the purchase price is supported by market value, since that protects both your down payment and their collateral position. A solid appraisal can also strengthen your negotiating position with a seller.
APR expresses your loan's true yearly cost, combining the interest rate with certain fees, so it's a more complete number to compare than the interest rate alone when shopping offers. A lower APR generally means lower total borrowing cost over the life of the loan. When comparing quotes from different lenders, APR is the figure to line up side by side rather than the headline rate.
Asset-based lending means the loan decision leans heavily on the value and quality of the aircraft itself as collateral, alongside your personal financial picture. It's the backbone of most aircraft financing, since the plane secures the loan the same way a house secures a mortgage. A well-maintained aircraft with strong resale characteristics can sometimes open up better terms because it holds its value as collateral.
This refers to replacing or adding cockpit electronics, such as navigation, communication, or autopilot systems, often to meet current standards like ADS-B or simply to modernize an older panel. Upgrades can meaningfully boost an aircraft's market value and appeal, which appraisers factor into a valuation. If you're financing a plane that still needs upgrades, it's worth discussing with your lender how that cost fits into your overall budget.
A balloon payment is a large lump sum due at the end of a loan term that's bigger than your regular monthly payments, because the loan wasn't fully amortized over its term. These structures can lower monthly payments along the way, but you need a plan, refinancing, selling, or cash on hand, for covering that final payment. Ask any lender up front whether a balloon is built into your proposed loan structure.
This is the legal document transferring ownership of the aircraft from seller to buyer, and it's filed with the FAA Aircraft Registry to make the new ownership official. Lenders require a properly executed bill of sale as part of the closing package before funds are released. Errors or gaps in this document are a common cause of closing delays, so accuracy here matters.
Some aircraft, notably certain composite and Cirrus-style designs, use adhesive-bonded structural components rather than traditional riveted metal. Inspecting bonded structure for delamination or moisture intrusion requires specialized training, so it's a detail worth confirming your pre-buy inspector is qualified to assess. Undetected issues here can be costly, which is why lenders care that the inspection was done by someone experienced with that specific airframe.
Bonus depreciation lets a business deduct a large share of a qualifying aircraft's cost in the year it's placed in service, rather than spreading it over many years. Under the One Big Beautiful Bill Act, signed July 4, 2025, 100% bonus depreciation was made permanent for qualifying property placed in service after January 19, 2025, removing the phase-down that had been scheduled under prior law. Eligibility depends on business-use requirements, timing of the purchase agreement, and other specific rules, so this is a topic to work through with a qualified tax professional before you assume any specific benefit applies to your purchase.
A borescope inspection uses a small camera to examine the inside of an engine's cylinders and turbine sections without disassembling it, checking for wear, corrosion, or damage. It's a standard part of a thorough pre-buy inspection and gives real insight into engine health beyond what the logbooks alone can tell you. Findings here can directly affect your negotiated price and, by extension, the loan amount you need.
How you'll use the aircraft, for business travel, a company's operations, or purely personal flying, affects everything from tax treatment to insurance pricing to certain loan structures. Lenders will typically ask about intended use during the application process because it shapes underwriting and documentation requirements. If tax benefits tied to business use are part of your decision, loop in a tax professional early, since the rules around qualifying use are specific.
The Cape Town Convention is an international treaty, adopted in 2001, that created a standardized way to register and protect financial interests in aircraft across borders, administered through the International Registry. For most single-engine piston buyers this won't come into play, but for turbine and larger aircraft, especially those involved in cross-border transactions, lenders may require an International Registry filing to protect their lien position globally. It exists to give financiers confidence their interest will be recognized no matter where the aircraft travels.
CAPS is the whole-airframe parachute system built into every Cirrus aircraft, designed to bring the plane and its occupants down safely in an emergency. The system requires a scheduled repack, generally every 10 years, which is a significant maintenance expense to factor into your ownership budget. Appraisers and insurers take the timing of the next repack into account when assessing a Cirrus's value and cost of ownership.
This describes a propeller-driven aircraft built and approved under FAA type-certification standards, as opposed to an experimental or kit-built airplane. Certified piston aircraft make up the bulk of first-time buyer financing at FLYING Finance, since they're well understood by lenders, insurers, and appraisers alike. That familiarity generally translates into more straightforward underwriting and a wider range of loan options.
A chattel mortgage is a loan secured by movable personal property, like an aircraft, rather than real estate. It's essentially the legal mechanism behind most aircraft loans: you own the plane, but the lender holds a security interest in it until the loan is paid off. This is recorded with the FAA to protect the lender's claim if the loan isn't repaid.
A clean title means the aircraft's ownership history is free of unresolved liens, judgments, or competing claims that could interfere with a sale or financing. Confirming clean title through a title search is one of the non-negotiable steps before any lender will close a loan. If a title search turns up an old, unreleased lien, it needs to be cleared before you can move forward.
These are the fees beyond the aircraft's purchase price needed to complete the transaction, things like title search fees, escrow fees, registration filing costs, and sometimes an origination fee. It's smart to budget for closing costs separately from your down payment so there are no surprises at the table. Your lender or closing agent should be able to give you an itemized estimate well before your closing date.
This is the neutral third party who holds funds and documents during a transaction and releases them only once every condition of the deal, like a clean title, executed bill of sale, and lender payoff, has been satisfied. Using an experienced aviation closing agent protects both buyer and seller from a deal falling apart mid-transaction. It's one of the best safeguards you have against fraud and title problems.
A co-borrower applies for the loan alongside you and shares equal responsibility for repayment, and typically also shares an ownership interest in the aircraft. Adding a qualified co-borrower can strengthen an application by combining income or credit profiles, which may help with approval odds or terms. Because both parties are equally on the hook, it's worth having a clear conversation about expectations before you apply together.
Co-ownership means two or more parties jointly own an aircraft, splitting costs, usage, and often financing responsibility, while fractional ownership programs sell a defined share of an aircraft (or fleet) with scheduled access. Lenders will want to see a clear, written ownership and usage agreement before financing a shared aircraft, since it affects both collateral and liability. This structure can make aircraft ownership more affordable, but it adds complexity to underwriting compared to sole ownership.
Collateral is the asset that secures a loan, in this case, the aircraft itself, which the lender can claim if the loan isn't repaid. Because the plane serves as its own collateral, its condition, documentation, and market value directly influence your loan terms. This is why lenders care so much about inspections, appraisals, and clean title before funding.
Comps are recent sale prices of similar aircraft, matched by model, year, equipment, and condition, used to gauge what a specific airplane is realistically worth. Appraisers and lenders rely on comps to sanity-check a purchase price against current market reality. If a deal's price is well outside the range of recent comps, expect questions during underwriting.
The FAA defines a complex aircraft as one with retractable landing gear, flaps, and a controllable-pitch propeller. Pilots need a specific complex endorsement to act as pilot-in-command of one, and insurers often ask about that endorsement and related experience before quoting a policy. Since insurability affects loan approval, this is a box worth checking early if you're eyeing a retractable-gear airplane.
This is training and a logbook sign-off confirming a pilot is qualified to fly aircraft with retractable gear, flaps, and a controllable-pitch propeller. Insurers typically require this endorsement, along with a minimum number of hours in type, before covering a complex airplane, and financing usually depends on having adequate insurance in place. If you don't have it yet, transition training can usually be arranged around the time of purchase.
A compression test checks how well each cylinder in a piston engine holds pressure, which is a good indicator of internal engine health and remaining useful life. It's a standard, low-cost part of any pre-buy inspection and can reveal problems well before they show up as performance issues. Weak compression readings can be a real bargaining chip, or a red flag, depending on the numbers.
This is a targeted inspection for rust or corrosion in the airframe, especially important for aircraft that have spent time near coastal or humid environments. Corrosion can be structural and expensive to repair, so its presence or absence materially affects an aircraft's value and insurability. A thorough pre-buy inspection should always include a corrosion check appropriate to the aircraft's history and geography.
A cosigner agrees to repay the loan if you can't, strengthening your application with their credit and income, but typically without taking an ownership stake in the aircraft. This differs from a co-borrower, who usually does share ownership. It's a meaningful commitment for the cosigner, since a missed payment affects their credit too, so it's worth an honest conversation before asking someone to sign on.
Your credit score is a numeric summary of your credit history that lenders use to gauge repayment risk, and it's one of the biggest factors in the interest rate and terms you'll be offered. Higher scores generally unlock lower rates and smaller down payment requirements. It's worth checking your score before you start shopping for an aircraft loan so there are no surprises during pre-qualification.
This is the record of any prior accidents, incidents, or significant repairs an aircraft has experienced, which should be documented in its logbooks and often in FAA or NTSB records. Past damage doesn't automatically disqualify an aircraft from financing, but it can affect appraised value, insurability, and loan terms depending on severity and repair quality. Always have damage history checked as part of your pre-buy inspection, not assumed from a clean-looking logbook alone.
De-registration removes an aircraft from the FAA registry, usually because it's been sold internationally, destroyed, or re-registered elsewhere. If you're financing an aircraft that will operate outside the U.S. or has an international ownership history, your lender and closing agent will want to confirm its registration status is clean and current. This is closely tied to title and lien clearance during closing.
DSCR compares the income available to a borrower against the debt payments owed, and it's a key metric lenders use for business-purpose or higher-value aircraft loans. A DSCR above 1.0 means there's more income than debt obligation, which lenders generally want to see with some cushion built in. If you're financing through a business entity, expect this ratio to come up during underwriting.
DTI compares your total monthly debt payments to your gross monthly income, and it's one of the core numbers lenders use to judge whether you can comfortably take on an aircraft loan. A lower DTI generally supports better rates and terms, since it signals more breathing room in your budget. Paying down other debt before applying can meaningfully improve your DTI and your financing options.
This is the amount you're responsible for out of pocket before your insurance coverage kicks in on a claim. Aircraft policies often carry different deductibles for ground versus in-flight damage, so it's worth reading the fine print. Your lender may have a maximum acceptable deductible, since a deductible that's too high could leave the collateral underinsured relative to the loan balance.
Default happens when a borrower fails to meet the loan's terms, most commonly by missing payments, and it can trigger serious consequences including repossession of the aircraft. Lenders generally work with borrowers who reach out early if they're struggling, since it's in everyone's interest to avoid default. Understanding your loan's specific default terms before you sign is always worth the extra ten minutes.
This describes how an aircraft's value typically declines over time, though the curve isn't always steady, some aircraft hold value remarkably well, while others drop faster in the early years of ownership. Understanding the depreciation curve for the specific make and model you're buying helps you gauge long-term equity and resale potential. It's also a factor in how lenders think about residual value and loan-to-value over the life of a loan.
This is the portion of the purchase price you pay up front in cash, with the loan covering the rest. A larger down payment typically means a lower loan-to-value ratio, which can translate into a better interest rate and easier approval. Down payment requirements vary by aircraft age, type, and your financial profile, so it's one of the first things to discuss with a lender.
An EAB aircraft is one built by an individual or group from a kit or plans, primarily for education and recreation rather than commercial certification. These aircraft are financeable, but lenders typically look closely at builder documentation, the aircraft's condition inspection history, and often require the original builder or a qualified mechanic to have signed off on the build. Insurance and appraisal for EABs can also work a bit differently than for type-certificated aircraft, so ask your lender what to expect.
An encumbrance is any claim against an aircraft, such as a lien, judgment, or lease obligation, that could affect clear ownership transfer. A title search is designed to surface any encumbrances before closing, and a lender won't fund a loan until they're resolved. It's one more reason a thorough title search is worth the modest cost.
Equity is the difference between what your aircraft is worth and what you still owe on it. As you pay down the loan, and depending on how the aircraft's value holds up, your equity generally grows over time. Tracking equity is useful if you're considering a future upgrade, refinance, or sale.
This is the point in ownership where your aircraft's market value catches up to, or exceeds, your remaining loan balance, meaning you'd have positive equity if you sold. Aircraft that depreciate quickly in early ownership years can leave you underwater on the loan for a period before reaching this crossover. Understanding roughly when this happens for your specific aircraft and loan structure helps you plan for a future sale or trade.
Escrow is a neutral holding arrangement where funds and documents sit with a third party until every condition of the sale, clear title, signed bill of sale, insurance in place, is met. It protects both buyer and seller by making sure money and paperwork exchange hands at the same moment. Nearly every financed aircraft transaction closes through some form of escrow.
This document certifies that an aircraft meets the airworthiness standards of the country it's being exported to, and it's required when an aircraft is sold internationally. If you're financing a purchase of an aircraft coming from overseas, or selling one abroad, this certificate becomes part of the closing paperwork your lender and closing agent will want to see. It's a more specialized document than the standard airworthiness certificate used domestically.
This is the federal database, maintained in Oklahoma City, that records aircraft ownership, N-number assignment, and recorded liens for every U.S.-registered civil aircraft. Lenders file their lien here to protect their interest in your aircraft, and a title search pulls directly from this registry. Nearly every step of a financed purchase, from application to closing, ultimately ties back to what's on file here.
Fair market value is the price a willing buyer and willing seller would agree on, with neither under pressure to act and both reasonably informed about the aircraft's condition. It's the benchmark lenders and appraisers use to make sure a purchase price is reasonable relative to the market. If you're financing near or above fair market value, expect a lender to want a strong justification, like rare upgrades or exceptional condition.
A ferry flight moves an aircraft from one location to another, often from seller to buyer, without carrying passengers or cargo for compensation. It's commonly arranged right after closing to get the newly purchased aircraft to its home base. Insurance coverage for the ferry flight should be confirmed before departure, since a lapse in coverage during transit is an easy thing to overlook amid closing paperwork.
This is a clause in a purchase agreement making the sale conditional on the buyer securing financing by a certain date. It protects you as a buyer, since if your loan falls through, you can typically walk away from the deal without forfeiting your deposit. Getting pre-qualified before you make an offer can help you negotiate a shorter financing contingency window, which sellers often appreciate.
This means a lender's claim on the aircraft has priority over any other creditor's claim if the aircraft needs to be repossessed and sold. Most standard aircraft loans require the lender to hold first lien position, since it's the strongest possible protection for their collateral. If an aircraft already has an existing lien on it, that has to be cleared before a new lender will fund in first position.
A fixed-rate loan locks in the same interest rate for the entire loan term, so your payment amount doesn't change even if market rates move. This predictability makes budgeting easier and protects you if rates rise after you close. Fixed rates are the most common structure for aircraft loans, especially for owner-flown, non-commercial purchases.
Every certificated pilot needs a flight review with an instructor at least every 24 calendar months to keep flying privileges current. Insurers frequently ask about the recency of a pilot's flight review, since lapsed currency can affect a policy's validity, and coverage in turn can affect loan approval. Keeping this current is a simple but important piece of staying insurable.
Forbearance is a temporary arrangement where a lender agrees to reduce or pause loan payments during a period of financial hardship, with the understanding that payments resume (often with the missed amounts added back in) later. It's not automatic, you generally have to request it and demonstrate the hardship. Reaching out to your lender proactively, before you miss a payment, gives you the best shot at a workable arrangement.
If a borrower lets their required aircraft insurance lapse, the lender can purchase a policy on the borrower's behalf to protect the collateral, then bill the cost back to the borrower, often at a higher rate than a policy you'd shop for yourself. It's a real financial downside worth avoiding by simply keeping your own coverage current. Most loan agreements spell out this right explicitly, so it's worth understanding before you sign.
A gear swing is a test where the landing gear is retracted and extended (with the aircraft safely supported) to confirm it operates correctly and within specifications. It's a standard part of a pre-buy inspection on any retractable-gear aircraft, since gear problems are both safety-critical and expensive to fix. A clean gear swing gives real confidence in an otherwise hard-to-inspect system.
A glass cockpit replaces traditional analog gauges with digital display screens for flight instruments, navigation, and engine data. Aircraft with modern glass panels often command higher resale value and can be easier to insure, since the integrated systems tend to reduce pilot workload. Appraisers factor in whether a panel is glass, a hybrid, or original steam gauges when assessing value.
This is your total income before taxes and deductions, and it's the starting number lenders use to calculate your debt-to-income ratio. Being able to clearly document gross monthly income, through pay stubs, tax returns, or business financials, helps keep your loan application moving smoothly. Self-employed and business-owner applicants should expect to provide a bit more documentation here than salaried applicants.
Gross weight is the maximum total weight, aircraft, fuel, passengers, and cargo combined, that an aircraft is certified to safely operate at. It's a fixed number set by the manufacturer and confirmed in the aircraft's weight and balance documentation. Understanding gross weight (and how much useful load it leaves you) matters for buyers evaluating whether an aircraft actually fits their real-world mission.
A hard pull happens when a lender checks your full credit report as part of a formal loan application, and it can cause a small, temporary dip in your credit score. This is different from a soft pull, which doesn't affect your score and is often used for initial pre-qualification. Ask a lender whether they're doing a soft or hard pull at each stage so you know what to expect.
The FAA defines a high-performance aircraft as one with an engine producing more than 200 horsepower. Pilots need a specific high-performance endorsement to act as pilot-in-command, and insurers typically want to see it, along with relevant experience, before quoting a policy. Since coverage affects financing, this is worth sorting out early if you're stepping up to a more powerful airplane.
This is training and a logbook sign-off confirming a pilot is qualified to fly an aircraft with an engine over 200 horsepower. Like the complex endorsement, it's frequently a condition insurers set before covering higher-powered aircraft, which in turn matters to lenders who require proof of insurance to close. If you don't yet have this endorsement, most flight schools can arrange the training quickly.
Hull value is the insured value of the aircraft itself, separate from liability coverage, and it's what would be paid out in a total-loss claim. Lenders generally require hull coverage at least equal to the loan balance, so their collateral stays protected throughout the loan term. As your aircraft's market value or your loan balance changes over time, it's worth revisiting whether your hull value is still set appropriately.
This rating qualifies a pilot to fly using instruments alone, in clouds or reduced visibility, rather than by looking outside. Insurers often view an instrument-rated pilot as lower risk, especially for aircraft used for real cross-country travel, which can translate into more favorable insurance pricing. Since insurance is usually a condition of closing, a pilot's ratings are something your lender will ask about early on.
A binder is a temporary proof-of-insurance document confirming coverage is in place while the full policy is being finalized. Lenders typically require a binder showing adequate hull and liability coverage, with them listed as loss payee, before releasing funds at closing. It's usually one of the last pieces to fall into place before a closing can happen.
Jet aircraft are powered by turbine engines that produce thrust directly, without a propeller, and they range from small single-engine light jets to large business jets. Financing a jet typically involves more extensive underwriting than a piston aircraft, given the higher price points and the pilot qualifications, often including type ratings, that insurers require. If a jet is in your future, expect a more detailed conversation with your lender about crew requirements and operating structure.
A kit aircraft is sold as a set of parts and plans for an individual or company to assemble, most commonly resulting in an experimental amateur-built aircraft once complete. Financing a kit-built aircraft, whether mid-build or finished, generally requires more documentation than a factory-built airplane, since lenders want a clear paper trail of who built it and how it was inspected. If you're financing a partially completed project, ask your lender directly whether they offer that kind of loan, since not all do.
The lender is the institution, like FLYING Finance, that provides the loan funds and holds a security interest in the aircraft until it's repaid. Different lenders specialize in different aircraft types, price points, and use cases, so it's worth working with one that understands aviation specifically rather than a generalist bank. That expertise often shows up in smoother underwriting and fewer surprises at closing.
Liability coverage protects you financially if your aircraft causes injury or property damage to someone else, separate from hull coverage which protects the aircraft itself. Lenders typically require a minimum liability limit as a condition of the loan, since an uninsured liability claim could threaten your ability to keep paying the loan. It's worth discussing appropriate liability limits with an aviation insurance broker rather than defaulting to policy minimums.
A lien is a legal claim against the aircraft that gives a creditor the right to repossess and sell it if a debt isn't repaid. When you take out an aircraft loan, the lender files a lien against your aircraft with the FAA registry. That lien is released once the loan is paid off in full, clearing the title for a future sale.
Many buyers hold title to their aircraft through a limited liability company rather than in their own name, which can offer liability protection and sometimes cleaner tax and operational structuring. Financing an LLC-owned aircraft is entirely doable, but lenders will typically ask for a personal guaranty from the LLC's owner(s), since a newly formed entity usually has no credit history of its own. If this structure interests you, it's worth setting up with a business or aviation attorney before you apply.
Your loan officer is the person at the lender who guides you through the application, gathers your documentation, and helps structure a loan that fits your situation. A good aviation loan officer understands aircraft-specific factors, like engine time or damage history, that a generalist consumer lender might not know to ask about. Building a relationship with your loan officer early can make the whole process considerably smoother.
This is the length of time you have to repay the loan, commonly ranging from 10 to 20 years for aircraft, depending on the age and type of aircraft. Longer terms lower your monthly payment but increase total interest paid over the life of the loan, while shorter terms do the reverse. Aircraft age often factors into the maximum term a lender will offer, since older airframes carry more uncertainty about long-term value.
LTV compares your loan amount to the aircraft's appraised value, expressed as a percentage. A lower LTV, meaning a bigger down payment relative to the aircraft's value, generally supports better interest rates and easier approval, since it gives the lender more cushion if the aircraft needs to be repossessed and resold. LTV limits often get tighter for older aircraft, which is one more reason vintage and condition matter to your financing options.
This is any gap, inconsistency, or unclear entry in an aircraft's maintenance or flight records, missing pages, unexplained time jumps, or unsigned entries, for example. Discrepancies don't automatically sink a deal, but they raise questions an underwriter and appraiser will want answered before financing moves forward. A thorough pre-buy inspection should flag these early so they can be resolved, or priced into the deal, before closing.
Logbooks are the official written record of an aircraft's flight time, maintenance, inspections, and repairs over its entire life. Complete, well-organized logbooks are one of the single biggest factors in both appraised value and how smoothly your loan underwriting goes. Missing logbooks, even for an otherwise excellent aircraft, can significantly complicate financing and resale.
LSA is a simplified aircraft category defined by specific limits on weight, speed, and seating, historically capped at two seats and 1,320 pounds. Under the FAA's MOSAIC rule, this category is evolving to include a broader range of capable aircraft under a new light-sport category airworthiness certificate. LSAs are typically financeable, though loan terms and available lenders can differ somewhat from traditional certified aircraft, so it's worth asking specifically.
This is the regular amount you pay toward your loan, made up of principal and interest (and sometimes an escrowed insurance amount). Your monthly payment is driven by the loan amount, interest rate, and term, so adjusting your down payment or term length are the two main levers for changing it. Always ask a lender for the all-in monthly figure, including any required insurance or reserve contributions, rather than just the loan payment alone.
MOSAIC is an FAA rule overhauling the rules for light-sport aircraft design, certification, and pilot privileges. New sport-pilot privileges took effect October 22, 2025, and the more fundamental aircraft certification changes (14 CFR Part 22) took effect July 24, 2026. Together the rule expands what qualifies as a light-sport category aircraft, opening the door to faster, heavier, and more capable airplanes than the old LSA category allowed, which is reshaping both the used aircraft market and financing options in this segment. If you're shopping in the light-sport space, ask your lender how MOSAIC affects appraisal and loan terms for the specific aircraft you're considering, since lenders and insurers are still updating their guidelines to the new rule.
A multi-engine aircraft has two or more engines, which typically means added performance and, in the event of an engine failure, a backup power source. Multi-engine aircraft usually cost more to insure and finance than comparable single-engine airplanes, given higher purchase prices and specific pilot rating requirements. Lenders will want to confirm a pilot holds the appropriate multi-engine rating before closing on this type of loan.
The N-number is an aircraft's unique registration identifier, always starting with N for U.S.-registered aircraft, displayed on the exterior and tied to its FAA registry record. It functions much like a license plate, following the aircraft (not the owner) unless it's specifically reserved and transferred. Lenders and title companies use the N-number to pull registry and lien history during the closing process.
This insurance provision limits coverage to specific pilots listed by name on the policy, rather than anyone who meets general qualifications. It usually reflects tighter underwriting, often because of the aircraft's complexity or a pilot's relatively limited experience in type. If you plan to have others fly your aircraft, confirm whether your policy is named-pilot or open before you hand over the keys.
In a non-recourse loan, the lender's only recourse if you default is to repossess and sell the collateral, the aircraft, and they generally can't pursue you personally for any remaining shortfall. These are less common in aircraft financing than recourse loans and typically come with stricter down payment and qualification requirements to offset the lender's added risk. Ask your lender directly which structure you're being offered, since the difference matters a great deal if things go sideways.
This insurance provision allows any pilot who meets defined minimum qualifications, rather than specifically named individuals, to legally fly the insured aircraft. It offers more flexibility than a named pilot warranty, which matters if you expect multiple people to fly the plane. Open warranties are more commonly available on simpler, lower-risk aircraft.
This is a fee a lender charges for processing and underwriting your loan, often expressed as a percentage of the loan amount. It's one of the closing costs to factor into your total budget, and it's worth asking upfront whether it's rolled into the loan or paid separately at closing. Comparing origination fees across lenders alongside APR gives you the clearest full picture of true borrowing cost.
Part 23 is the FAA regulation governing the design and certification of most small, general aviation airplanes, from trainers up through many business turboprops. It sets the safety and performance standards that manufacturers must meet before an aircraft can be sold and flown. Nearly every piston and light turboprop aircraft financed at FLYING Finance was certificated under Part 23.
Part 25 is the FAA regulation covering larger transport-category aircraft, generally the airliners and larger business jets. It carries more stringent design and safety requirements than Part 23, reflecting the size and passenger loads these aircraft carry. If you're financing a larger business jet, you'll see this classification referenced in its certification paperwork.
A payoff letter is a lender's written statement of the exact amount needed to fully satisfy a loan as of a specific date, including any per-diem interest. If you're selling a financed aircraft or refinancing, your closing agent will need a current payoff letter from your existing lender to clear the old lien. These are typically only valid for a short window, so timing matters when you request one.
A personal guaranty is a promise by an individual, often a business owner, to personally repay a loan if the borrowing entity (like an LLC) can't. Lenders commonly require this when an aircraft is purchased through a company or LLC without an established credit history of its own. It effectively puts the guarantor's personal assets on the line alongside the aircraft as collateral, so it's worth understanding fully before signing.
Pre-approval means a lender has reviewed your financials in more depth than a simple pre-qualification and is prepared to lend up to a specific amount, subject to final aircraft-specific underwriting. Having a pre-approval letter in hand makes you a stronger, more credible buyer when negotiating with a seller. It's a meaningfully more solid step than pre-qualification, which is more of a preliminary estimate.
A pre-buy inspection is an independent mechanic's thorough evaluation of an aircraft's condition before you commit to purchase, covering everything from engine health to airframe corrosion to logbook completeness. This is arguably the single most important step in buying an aircraft, and most lenders either require one or strongly recommend it before financing. Findings from the PPI often shape final negotiations on price, and sometimes on loan terms too.
Pre-qualification is an early, lighter-touch estimate of what you might be able to borrow, based on basic financial information you provide, often without a hard credit pull. It's a useful first step to gauge your budget before you start seriously shopping for an aircraft. Just keep in mind it's not a firm commitment the way a pre-approval is.
This is a fee some loans charge if you pay off the balance early, either in full or beyond a certain extra amount each year. Not all aircraft loans include one, so it's an important question to ask before you sign, especially if you think you might sell, upgrade, or refinance sooner than the full loan term. If you value flexibility, seek out a loan explicitly without a prepayment penalty.
The promissory note is the legal document in which you formally promise to repay the loan under specific terms, interest rate, payment schedule, and consequences of default. It's the core contract of your financing, separate from the security agreement that gives the lender a lien on the aircraft. Read it carefully, or have an attorney do so, since it governs your obligations for the life of the loan.
This is the contract between buyer and seller spelling out the aircraft, price, contingencies (like financing or inspection results), and closing timeline. A well-written purchase agreement protects both parties and gives your lender the clear terms they need to finalize underwriting. It's worth having an aviation-savvy attorney or broker review this document before you sign, since aircraft-specific contingencies aren't always standard in generic contract templates.
A rate lock guarantees your quoted interest rate for a set period while your loan moves through underwriting and closing, protecting you if market rates rise in the meantime. Lock periods are usually time-limited, so if your closing gets delayed past the lock window, you may need an extension or risk a new rate. It's worth asking your lender exactly how long a rate lock lasts and what happens if you don't close in time.
In a recourse loan, if repossessing and selling the aircraft doesn't cover the full loan balance, the lender can pursue you personally for the remaining shortfall. This is the standard structure for most aircraft financing, since it gives lenders more protection and often translates into more competitive rates and terms than non-recourse alternatives. It's a good reminder that an aircraft loan is a serious personal financial commitment, not just a transaction tied solely to the plane's value.
Refinancing replaces your existing aircraft loan with a new one, often to secure a better rate, adjust your term, or tap into built-up equity. It can make sense if your credit has improved, market rates have dropped, or your original loan terms no longer fit your situation. As with your original loan, expect the lender to want a current appraisal and updated logbook review before approving a refinance.
This document confirms an aircraft's owner of record with the FAA and must be renewed periodically to stay current. Current registration is required for legal flight, and lenders and title companies confirm it's in good standing as part of closing. A lapsed registration is a fixable but avoidable delay, so it's worth double-checking before you get to the closing table.
Repossession is a lender's legal right to take back an aircraft used as collateral if a borrower defaults on their loan. It's a last resort for lenders, who generally would rather work out a solution with a struggling borrower, but the right exists precisely because the aircraft secures the debt. Staying in communication with your lender at the first sign of financial trouble is the best way to avoid reaching this point.
Residual value is what an aircraft is expected to be worth at a specific future point, often used in lease calculations or when structuring a loan with a balloon payment. Aircraft that are known to hold their value well support more favorable residual value assumptions, which can affect loan structure. It's a useful concept to understand if you're weighing a balloon-payment loan against a fully amortizing one.
Retractable gear folds up into the airframe during flight to reduce drag and improve speed and efficiency, as opposed to fixed gear that stays extended at all times. Aircraft with retractable gear are classified as complex, requiring a specific pilot endorsement, and they typically come with a bit more maintenance complexity and insurance scrutiny than fixed-gear counterparts. This is worth factoring into your budget beyond just the purchase price.
This is the formal sign-off by a certified mechanic confirming an aircraft is airworthy again after maintenance, repair, or inspection. Any open maintenance item without a proper return-to-service entry is a red flag during underwriting, since it suggests the aircraft may not currently be legal to fly. Confirming clean return-to-service documentation is a routine but important part of any pre-buy inspection.
Section 179 of the tax code allows businesses to deduct the full purchase price of qualifying equipment, potentially including an aircraft used for business purposes, in the year it's placed in service, up to annual limits set by the IRS. These limits and thresholds are adjusted periodically and eligibility depends on business-use percentage and other specific rules. Because the details matter and change, this is a decision to make with a qualified tax professional, not something to assume applies based on a general rule of thumb.
A secured loan is backed by collateral, in this case the aircraft, which gives the lender recourse to repossess the asset if the loan isn't repaid. Because the collateral reduces the lender's risk, secured aircraft loans generally offer better rates than unsecured personal loans would for the same amount. Essentially all aircraft financing works this way, with the plane itself standing behind the loan.
In seller financing, the aircraft's seller acts as the lender, allowing the buyer to make payments directly to them instead of, or alongside, a traditional loan. It's less common in aircraft transactions than in real estate, but it does occasionally show up, particularly for older or unusual aircraft that traditional lenders are more hesitant to finance. If you encounter this structure, it's still worth having the terms reviewed by an attorney, since protections you'd get from a regulated lender may not automatically be built in.
A Service Bulletin is guidance issued by a manufacturer recommending (though not always legally requiring) an inspection, repair, or modification. Unlike an Airworthiness Directive, compliance with an SB isn't mandated by the FAA unless it's separately referenced in an AD, but many owners follow them anyway to maintain value and reliability. Reviewing outstanding SBs is a standard part of due diligence before financing an aircraft.
As the name suggests, this is an aircraft powered by one engine, and it represents the majority of aircraft financed for personal and small business use. Single-engine aircraft are typically less expensive to purchase, insure, and maintain than multi-engine or turbine aircraft, which often makes financing more straightforward. Most first-time aircraft buyers start their search in this category.
SMOH tracks the number of hours an engine has flown since its last major overhaul, when it was essentially rebuilt to like-new internal specifications. A lower SMOH relative to the engine's TBO generally supports stronger appraised value and easier financing, since there's more usable engine life remaining before the next overhaul expense. This is one of the first numbers most buyers, appraisers, and lenders check.
A smooth insurance policy covers damage from any cause, including hard or careless landings, while a rough policy carves out coverage for landing gear or propeller damage from hard landings specifically. Smooth policies cost more but offer broader protection, which can matter if the aircraft will be used for training or by lower-time pilots. It's worth asking your insurance broker plainly which type you're being quoted, since the difference isn't always obvious from the paperwork alone.
SNEW indicates hours accumulated since a component, often an engine, was manufactured brand new, as opposed to since its last overhaul. It's a useful distinction because an engine can have relatively low SMOH but high SNEW, or vice versa, and both numbers matter for understanding true remaining life. Appraisers look at both figures together rather than relying on just one.
A soft pull is a credit check that doesn't affect your credit score, often used for pre-qualification or when you check your own credit report. It gives a lender or you a general sense of creditworthiness without the temporary score dip that comes with a hard pull. Ask a lender which type of check they're running at each stage of your application.
The wing spar is the primary structural beam that carries a wing's load, and certain aircraft models have specific Airworthiness Directives requiring periodic spar inspections due to known fatigue or corrosion risks. A spar issue is one of the more serious and expensive findings possible in an inspection, so confirming spar AD compliance is essential before financing an affected model. If you're shopping a make and model known for spar ADs, ask specifically about its compliance status early in the process.
This certificate covers aircraft that don't fit the standard airworthiness category, including experimental amateur-built aircraft, light-sport aircraft, and some restricted-use aircraft. It comes with operating limitations specific to that aircraft's category. Lenders and insurers will want to confirm exactly which special category applies, since it affects both financing terms and how the aircraft may legally be used.
This is the certificate issued to type-certificated aircraft, like most certified pistons, turboprops, and jets, confirming they meet FAA design and manufacturing standards for normal operation. It's the most common and most straightforward certificate type for lenders and insurers to work with. If you're buying a traditional certified aircraft, this is the certificate you should expect to see in the paperwork.
An STC is FAA approval for a specific modification to an already type-certificated aircraft, things like a new engine, avionics package, or aerodynamic improvement. Modifications covered by a valid STC are generally viewed favorably by appraisers and lenders, since they're documented and FAA-approved rather than an unapproved field modification. Always confirm that any non-standard equipment on an aircraft you're financing has proper STC documentation in the logbooks.
Subordination is an agreement where one lienholder agrees their claim on the aircraft ranks behind another lender's claim, even if their lien was filed earlier. This occasionally comes up in refinancing or when multiple loans exist against the same asset. Lenders generally want to be in first position, so subordination agreements need to be handled carefully and correctly to avoid title complications later.
A taildragger has its two main wheels forward and a smaller wheel or skid at the tail, as opposed to the tricycle gear (nosewheel forward) found on most modern trainers. Flying one requires a specific tailwheel endorsement, and insurers often ask about tailwheel-specific experience separately from a pilot's overall hours. If you're eyeing a classic taildragger, factor in both training time and insurance requirements as part of your overall budget.
TBO is the manufacturer's recommended number of hours an engine can fly before it should undergo a major overhaul. It's a guideline rather than a strict legal requirement for most private operators, but it's a heavily weighted factor in both appraised value and insurance underwriting. An engine approaching its TBO generally reduces an aircraft's value, since the buyer is closer to facing that overhaul expense.
A term sheet is a summary document outlining the proposed key terms of a loan, rate, amount, term length, down payment, before final documents are drawn up. It gives you a clear, plain-language snapshot to review and compare against other offers before committing. Treat it as a serious proposal, though generally not a fully binding commitment until final loan documents are signed.
This is the number of flight hours a pilot has logged in the specific make and model of aircraft they intend to fly, as distinct from their overall total time. Insurers frequently set minimum time-in-type requirements, especially for higher-performance or complex aircraft, and meeting them can meaningfully affect your insurance cost. If you're moving up to a new type, transition training can help you build this experience efficiently.
A title search examines the FAA registry to confirm an aircraft's ownership history is clear of unresolved liens, judgments, or other claims before a sale closes. It's a standard, relatively inexpensive step that protects both buyer and lender from inheriting someone else's financial or legal problem. No reputable lender will fund a loan without a clean title search completed first.
Total time is the cumulative number of flight hours a pilot has logged across their entire flying career, regardless of aircraft type. It's one factor, among several, that insurers weigh when setting premiums and eligibility, though time in type often matters just as much for a specific aircraft. Lenders will typically ask for your total time as part of the loan application since it feeds into the insurability picture.
This is focused instruction to help a pilot safely move from one aircraft type to a different, often more complex or higher-performance, one. Insurers frequently require documented transition training before extending or reducing restrictions on a new policy, and completing it can measurably lower your insurance cost. If you're financing a step-up aircraft, it's worth arranging this training to coincide with your purchase timeline.
Some aircraft are held in a trust rather than directly by an individual or company, often used by non-U.S. citizens to meet FAA registration requirements, or for certain privacy or liability considerations. Financing a trust-owned aircraft is possible but involves additional legal documentation to make sure the lender's lien is properly secured against the trust. This structure typically requires coordination between your lender, an aviation attorney, and the trust company.
TTSN is the total number of hours an airframe or engine has accumulated since it was manufactured, distinct from time since its most recent overhaul. It's a foundational number appraisers and lenders reference constantly, since it speaks directly to how much useful life, and value, remains in the aircraft. You'll find TTSN prominently recorded in the logbooks for both the airframe and each engine.
Turbine aircraft are powered by gas turbine engines, a category that includes both turboprops and jets, generally offering more power, altitude capability, and reliability than piston engines, at a meaningfully higher cost. Financing turbine aircraft usually involves more detailed underwriting, given higher price points and often business-related use cases. Pilot qualifications and experience requirements also tend to be more rigorous for turbine aircraft insurance.
A turboprop uses a turbine engine to drive a propeller, combining some of the power and altitude performance of a jet with the efficiency and shorter runway needs of a propeller aircraft. They're popular for owner-flown business travel, and financing them often falls in a middle ground, more involved than piston loans, generally more accessible than jet financing. Insurers commonly set specific time-in-type and training requirements for turboprop coverage.
A type-certificated aircraft is one built and approved under an FAA-issued type certificate, meaning its design has met formal government safety and performance standards. This is the most common category among financed aircraft, since it comes with a well-established framework for maintenance, parts, and airworthiness that lenders and insurers are comfortable underwriting. Certified pistons, turboprops, and jets all generally fall into this category.
A UCC-1 is a public filing that records a lender's security interest in an asset, and for aircraft loans, it's typically filed alongside the FAA lien recording to further protect the lender's collateral position. It's mostly an administrative, behind-the-scenes step in closing, but it's an important one, since it establishes the lender's legal priority if there's ever a dispute over the aircraft. You generally won't need to do anything with this filing yourself; your lender or closing agent handles it.
Underwriting is the process a lender uses to evaluate the risk of your loan, reviewing your credit, income, and the aircraft's condition, value, and documentation before approving final terms. It's where all the pieces, your financial picture and the aircraft's, come together into a final decision. Having your logbooks, inspection report, and financial documents organized in advance can meaningfully speed up this stage.
Useful load is the difference between an aircraft's empty weight and its maximum gross weight, representing what's available for fuel, passengers, and baggage combined. A generous useful load gives more flexibility for how you actually plan to use the aircraft, and it's a practical number worth checking against your typical missions before you buy. It's found in the aircraft's weight and balance documentation.
A variable-rate loan's interest rate can move up or down over time based on a benchmark index, meaning your payment could change during the loan term. These loans sometimes start with a lower rate than a fixed-rate option, but they carry the risk of rising payments if rates climb. If predictability matters to your budget, it's worth weighing this trade-off carefully against a fixed-rate loan.
Vref and Aircraft Bluebook are well-known industry valuation guides that estimate an aircraft's baseline market value based on model, year, and typical equipment, which appraisers then adjust for the specific aircraft's actual condition, upgrades, and history. Lenders often reference these guides as a starting benchmark during underwriting, alongside a full independent appraisal. They're a useful starting point for buyers too, though the real number always comes down to the specific airplane in front of you.
This is the calculation and documentation confirming an aircraft is loaded within its approved weight limits and center-of-gravity range for safe flight. Every aircraft carries its own current weight and balance report, which buyers and lenders should confirm is accurate and up to date, especially if equipment has been added or removed since the last calculation. It directly affects useful load, so it's worth reviewing closely if payload capacity matters to your plans for the aircraft.
Wire fraud in aircraft transactions typically involves scammers intercepting emails and sending fake wiring instructions that redirect a buyer's closing funds to a criminal's account, a real and increasingly common risk in aviation deals. Always verify wiring instructions by phone, using a number you already know is correct and not one from the email itself, before sending any funds. Reputable closing and escrow agents will expect and welcome this kind of verification call, so never feel awkward about making it.
If you run into financing language you don’t recognize while shopping for a loan, our team is happy to walk through it.
See How Financing WorksThis glossary is provided for general educational purposes and does not constitute tax, legal, or financial advice. Definitions involving tax treatment (such as bonus depreciation or Section 179) or legal structures should be discussed with a qualified tax professional or attorney before you rely on them for a specific transaction. Regulatory terms (such as MOSAIC) reflect FAA rules as of their most recent phase-in dates and may be updated as FAA guidance evolves.
