How difficult is it to get financing?

Heath · August 4th, 2004, 17:00

Just curious how spotless your credit has to be in order to get approved. Anybody had problems?

I HATE asking for money!!! [img]/ubbthreads/images/graemlins/banghead.gif[/img]

IndianaPilot · February 5th, 2005, 12:30

Well hopefully its not hard with a co-signer. My credit is not the best. My dad is going to co-sign for me, and he has perfect credit. So we'll see.... I mean if the loan doesnt get approved, for me that would be the end of it. Flying would have to stay as a hobby. I'm actually pretty nervous about that part of it !!

SmitteyB · February 5th, 2005, 23:57

Lower interest rate with a cosigner.

IndianaPilot · February 6th, 2005, 21:33

You guys know how it works with the Key Loan as far as the co-signer goes ? My dad was asking how that would work. What is the co-borrower release option ? I seen that too.

SmitteyB · February 7th, 2005, 13:06

Release option? I don't think the co-signer is ''off the hook'' until the loan is PIF.

AirArney · February 7th, 2005, 13:41

Just my 2 cents. I have found that Key Bank is dying to give money away. My advice is to take only what you need, because with a co-signer, Key Bank will most likely give you the whole 100,000 (actually it is 99,999). The Key Alternative Loan is the most used loan for aviation education in the world.

AirArney · February 7th, 2005, 13:49

Also, I believe the Key Loan does have a co-signer release after 48 months of successful payback. Some other lenders, like Citibank and Wells-Fargo have a release sooner, but you can't borrow as much from them.

IndianaPilot · February 8th, 2005, 13:33

Thanks for more feedback guys. Yep AirArney you are correct about the 48 month release. I called Key and asked about the alternative aviation loan. They said after 48 months of consecutive on time payments, the co-signer can be released of all liablity. Somebody mentioned above about getting 99,999 with a co-signer....I'm just going to take what I need like you said.

SmitteyB · February 8th, 2005, 13:51

You should always take our more than you need...For all you know you could get stuck on ground reference manuevers and it would take 2 weeks to get down pat...then you're 10 hours away from you checkride with no money...budget for this type of thing...

By the way...I just took out a loan from Key Bank for Ari Ben in Fort Pierce for $48,500 (training, living and a 4 yr degree), with a cosigner (good credit, just haven't had credit long enough)...

Well with a fairly reasonable interest rate of 5.78%...the loan will take my 15 years to pay off (180 months)

I will end up paying Key Bank...$79,399.80 when all is said and done.

Thats roughly $30,899.80 in just interest. I hope my medical doesn't fail me...

Good luck...

IndianaPilot · February 8th, 2005, 16:11

WOW thats a lot in interest...never realize how much it is until you actually see it like that. What is that gonna make your monthly payment ??

SteveC · February 8th, 2005, 16:25

[ QUOTE ]
....a loan from Key Bank for Ari Ben in Fort Pierce for $48,500 (training, living and a 4 yr degree), with a cosigner (good credit, just haven't had credit long enough)...

Well with a fairly reasonable interest rate of 5.78%...the loan will take my 15 years to pay off (180 months)

I will end up paying Key Bank...$79,399.80 when all is said and done.

Thats roughly $30,899.80 in just interest. I hope my medical doesn't fail me...

[/ QUOTE ]

[ QUOTE ]
WOW thats a lot in interest...never realize how much it is until you actually see it like that.

[/ QUOTE ]

I don't even have to say anything, do I????

SmitteyB · February 8th, 2005, 18:05

[ QUOTE ]
WOW thats a lot in interest...never realize how much it is until you actually see it like that. What is that gonna make your monthly payment ??

[/ QUOTE ]

180 months at $441.30...

Oh by the way...add 8,000 for a semester at a University in New York State for my private + a semester of aviation courses.

So...about $500-550 a month for about 15 years.

But what are you going to do?

IndianaPilot · February 8th, 2005, 20:17

Smittey the master plan for me is to take the 38,000 for the program at ATP. Also the 8500 for the associates degree through UVSC. I'm also going to add the examiners fees, which I beleive was around 2500. I've also been told that the regional jet standards coarse that ATP offers is a good thing to do also. That would probably bring the total loan to around 50,000. Thats kind of the master plan, but it may change. About your interest...I think you may have made a mistake with that calculation. I think you figured it as being 57% interest by mistake lol.

SmitteyB · February 8th, 2005, 23:34

No...no mistake. It's on the back of the letter I got today...I will scan and post it if needed. I wouldn't lie about this....

SteveC · February 9th, 2005, 12:13

[ QUOTE ]
....About your interest...I think you may have made a mistake with that calculation. I think you figured it as being 57% interest by mistake lol.

[/ QUOTE ]

No mistake. Compound interest spread over many years is a killer. Do a Google search on "Loan Calculators" and plug in some of your own numbers. Maybe it'll get people to think twice about financing flight training (or cars, boats, jet skis....).

SmitteyB, your final interest rate must be a little higher than 5.78%. Here are the results I got using your numbers in one of those on-line calculators:
[ QUOTE ]
Loan Payments Calculator

Loan Balance: $48,500.00
Loan Interest Rate: 5.78%
Loan Term: 15 years
Minimum Payment: $50.00

Monthly Loan Payment: $403.53

Number of Payments: 180

Cumulative Payments: $72,634.95
Total Interest Paid: $24,134.95

Note: The monthly loan payment was calculated at 179 payments of $403.53 plus a final payment of $403.08 .

It is estimated that you will need an annual salary of at least $48,423.60 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will devoted to repaying your student loans. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $32,282.40 , but you may experience some financial difficulty.

These results assume that the student is paying the interest charges on any unsubsidized loans and is not capitalizing the interest while in school. If the student is capitalizing the interest, the cumulative payments and total interest charges will be higher than shown here.

[/ QUOTE ]

Here's my source.

Here is another one:
[ QUOTE ]
Number of Monthly Payments 180
Simple Interest Rate 5.78
Principal Amount of Loan $ 48,500
Your Monthly Payment Will Be $ 403.52
Your Total Interest Cost Will Be $ 24,135.11
Minimum annual salary to handle these payments: $ 60,529.00

[/ QUOTE ]

(anybody notice the recommended annual salaries to handle that amount of loan debt? Want to compare those numbers to CFI or first year F/O wages for fun?)

[/soap box]

IndianaPilot · February 9th, 2005, 17:21

Yeah Steve i see what your saying. I went to that loan calculator....it's very alarming lol. The only thing I dont understand, is how they come up with the minimum salary you need in order to afford to pay the loan off. I mean, there are many people out there, CFI's, regional FO's, or anybody that is out of college for that matter...that have very poor paying jobs and are somehow making it. There is something that I think we are missing.....I mean...there is a way to survive......theres a lot of living, walking proof out there of that. I mean.....myself. I have a loan out that i used for my private, plus i have a big truck payment. And i still rent aircraft a few times a month to go fly. I make only 30,000/yr at the fire dept, and i am comfortable. Still have some to put away, and i'm able to do everything i want.

aloft · February 10th, 2005, 03:51

It SHOULD be very alarming, considering you won't see a $48k salary for at least 4 years after taking out the loan. You guys need to do the math on how, as a flight instructor averaging $12-15k/yr BEFORE taxes, rent, food, car, etc, you're going to afford a $450/mo loan payment! $12k/yr, less 15% in taxes (actually, it'll be more than that, since ATP's instructors are "independent contractors", meaning that you'll have to pay self-employment taxes of 7.65%. We'll be generous and call it a 25% tax liability. $12k/yr = $1k/mo - 25% = $750 - $450 loan payment = $300 - $200 rent at an ATP apartment - $100. That means cell phone (you do know you're required to have a cell phone, right?), food, car (to say nothing of health insurance) has to come out of that remaining $100. And if you've got existing student loans (remember, you need that 4 year degree), you're simply screwed.

Now, I'm sure some of you geniuses will suggest taking out enough of a loan so you can make your payments during the first two years or so while you're making next to nothing. That might work, but man, that's just stupid in my book.

Long story short, think long and hard before taking out a loan that size.

SmitteyB · February 10th, 2005, 12:33

I've got no other choice. Just have to get more work somewheres else while instructing to make ends meet.

By the way, there are no fixed interest rates with Key Bank, if interest rates go up....your student loan interest rate will go up...called a "Variable Rate"...

Brett

IndianaPilot · February 10th, 2005, 17:07

Yep I hear what your saying Smittey...gotta do what makes it work for you. I plan on doing the same thing...I have a national registry paramedic liscense...which means it's good all over the country. I'll have to work a second job as a medic, just like i do now. Aloft, I understand what your sayin...but what do u suggest then ? I mean....a loan is the only way to cover a program cost like that. No way to pay that much as you go. And once again, there are tons and tons of guys out there right now...that have done it...and are making it.

GaTechKid · February 10th, 2005, 17:10

Minor point to the overall theme of debt sucks, but it seems to me that you took too much out for taxes.

IndianaPilot · February 10th, 2005, 17:26

Yeah GaTech i see what he's saying about looking at it realisticly.....but.....it has to work somehow. I just keep reminding myself...there are guys out there doing it....there IS a way. So why give up ??

SmitteyB · February 10th, 2005, 19:21

I really don't think it is as impossible as he is saying. If it's a second job, so be it. I will do whatever it takes to get to a scheduled carrier. I agree that being an ATP instructor definitely sucks if you've got a payment that big coming. But hell...what do I know?

aloft · February 11th, 2005, 03:14

[ QUOTE ]
Minor point to the overall theme of debt sucks, but it seems to me that you took too much out for taxes.

[/ QUOTE ]

If anything, I didn't take out enough. "Independent Contractor" means you'll pay 15.3% just in Social Security/Self Employment taxes. Your state and federal income taxes are on top of that.

GaTechKid · February 11th, 2005, 22:17

So if a company, such as a flight school, treats its employees as "independent contractors" do they get out of paying the business share of social security/medicare taxes?

Heath · February 15th, 2005, 08:51

[ QUOTE ]
So if a company, such as a flight school, treats its employees as "independent contractors" do they get out of paying the business share of social security/medicare taxes?

[/ QUOTE ]

Yup. The IC has to pay them under the name "self-employment" taxes.

August 4th, 2004, 17:00	#1
Heath Senior Member Join Date: Oct 2003 Location: Bowling Green, KY Posts: 303	How difficult is it to get financing? Just curious how spotless your credit has to be in order to get approved. Anybody had problems? I HATE asking for money!!! [img]/ubbthreads/images/graemlins/banghead.gif[/img]

February 5th, 2005, 12:30	#2
IndianaPilot Senior Member Join Date: Jan 2005 Location: Indiana Posts: 423	Re: How difficult is it to get financing? Well hopefully its not hard with a co-signer. My credit is not the best. My dad is going to co-sign for me, and he has perfect credit. So we'll see.... I mean if the loan doesnt get approved, for me that would be the end of it. Flying would have to stay as a hobby. I'm actually pretty nervous about that part of it !!

February 5th, 2005, 23:57	#3
SmitteyB Old Skool Join Date: Nov 2004 Location: Ithaca, NY Posts: 1,957	Re: How difficult is it to get financing? Lower interest rate with a cosigner.

February 6th, 2005, 21:33	#4
IndianaPilot Senior Member Join Date: Jan 2005 Location: Indiana Posts: 423	Re: How difficult is it to get financing? You guys know how it works with the Key Loan as far as the co-signer goes ? My dad was asking how that would work. What is the co-borrower release option ? I seen that too.

February 7th, 2005, 13:06	#5
SmitteyB Old Skool Join Date: Nov 2004 Location: Ithaca, NY Posts: 1,957	Re: How difficult is it to get financing? Release option? I don't think the co-signer is ''off the hook'' until the loan is PIF.

February 7th, 2005, 13:41	#6
AirArney Newbie Join Date: Dec 2004 Location: NOLA Posts: 29	Re: How difficult is it to get financing? Just my 2 cents. I have found that Key Bank is dying to give money away. My advice is to take only what you need, because with a co-signer, Key Bank will most likely give you the whole 100,000 (actually it is 99,999). The Key Alternative Loan is the most used loan for aviation education in the world.

February 7th, 2005, 13:49	#7
AirArney Newbie Join Date: Dec 2004 Location: NOLA Posts: 29	Re: How difficult is it to get financing? Also, I believe the Key Loan does have a co-signer release after 48 months of successful payback. Some other lenders, like Citibank and Wells-Fargo have a release sooner, but you can't borrow as much from them.

February 8th, 2005, 13:33	#8
IndianaPilot Senior Member Join Date: Jan 2005 Location: Indiana Posts: 423	Re: How difficult is it to get financing? Thanks for more feedback guys. Yep AirArney you are correct about the 48 month release. I called Key and asked about the alternative aviation loan. They said after 48 months of consecutive on time payments, the co-signer can be released of all liablity. Somebody mentioned above about getting 99,999 with a co-signer....I'm just going to take what I need like you said.

February 8th, 2005, 13:51	#9
SmitteyB Old Skool Join Date: Nov 2004 Location: Ithaca, NY Posts: 1,957	Re: How difficult is it to get financing? You should always take our more than you need...For all you know you could get stuck on ground reference manuevers and it would take 2 weeks to get down pat...then you're 10 hours away from you checkride with no money...budget for this type of thing... By the way...I just took out a loan from Key Bank for Ari Ben in Fort Pierce for $48,500 (training, living and a 4 yr degree), with a cosigner (good credit, just haven't had credit long enough)... Well with a fairly reasonable interest rate of 5.78%...the loan will take my 15 years to pay off (180 months) I will end up paying Key Bank...$79,399.80 when all is said and done. Thats roughly $30,899.80 in just interest. I hope my medical doesn't fail me... Good luck...

February 8th, 2005, 16:11	#10
IndianaPilot Senior Member Join Date: Jan 2005 Location: Indiana Posts: 423	Re: How difficult is it to get financing? WOW thats a lot in interest...never realize how much it is until you actually see it like that. What is that gonna make your monthly payment ??

February 8th, 2005, 16:25	#11
SteveC Moderator Join Date: May 2003 Location: GRR Posts: 8,630	Re: How difficult is it to get financing? [ QUOTE ] ....a loan from Key Bank for Ari Ben in Fort Pierce for $48,500 (training, living and a 4 yr degree), with a cosigner (good credit, just haven't had credit long enough)... Well with a fairly reasonable interest rate of 5.78%...the loan will take my 15 years to pay off (180 months) I will end up paying Key Bank...$79,399.80 when all is said and done. Thats roughly $30,899.80 in just interest. I hope my medical doesn't fail me... [/ QUOTE ] [ QUOTE ] WOW thats a lot in interest...never realize how much it is until you actually see it like that. [/ QUOTE ] I don't even have to say anything, do I????

February 8th, 2005, 18:05	#12
SmitteyB Old Skool Join Date: Nov 2004 Location: Ithaca, NY Posts: 1,957	Re: How difficult is it to get financing? [ QUOTE ] WOW thats a lot in interest...never realize how much it is until you actually see it like that. What is that gonna make your monthly payment ?? [/ QUOTE ] 180 months at $441.30... Oh by the way...add 8,000 for a semester at a University in New York State for my private + a semester of aviation courses. So...about $500-550 a month for about 15 years. But what are you going to do?

February 8th, 2005, 20:17	#13
IndianaPilot Senior Member Join Date: Jan 2005 Location: Indiana Posts: 423	Re: How difficult is it to get financing? Smittey the master plan for me is to take the 38,000 for the program at ATP. Also the 8500 for the associates degree through UVSC. I'm also going to add the examiners fees, which I beleive was around 2500. I've also been told that the regional jet standards coarse that ATP offers is a good thing to do also. That would probably bring the total loan to around 50,000. Thats kind of the master plan, but it may change. About your interest...I think you may have made a mistake with that calculation. I think you figured it as being 57% interest by mistake lol.

February 8th, 2005, 23:34	#14
SmitteyB Old Skool Join Date: Nov 2004 Location: Ithaca, NY Posts: 1,957	Re: How difficult is it to get financing? No...no mistake. It's on the back of the letter I got today...I will scan and post it if needed. I wouldn't lie about this....

February 9th, 2005, 12:13	#15
SteveC Moderator Join Date: May 2003 Location: GRR Posts: 8,630	Re: How difficult is it to get financing? [ QUOTE ] ....About your interest...I think you may have made a mistake with that calculation. I think you figured it as being 57% interest by mistake lol. [/ QUOTE ] No mistake. Compound interest spread over many years is a killer. Do a Google search on "Loan Calculators" and plug in some of your own numbers. Maybe it'll get people to think twice about financing flight training (or cars, boats, jet skis....). SmitteyB, your final interest rate must be a little higher than 5.78%. Here are the results I got using your numbers in one of those on-line calculators: [ QUOTE ] Loan Payments Calculator Loan Balance: $48,500.00 Loan Interest Rate: 5.78% Loan Term: 15 years Minimum Payment: $50.00 Monthly Loan Payment: $403.53 Number of Payments: 180 Cumulative Payments: $72,634.95 Total Interest Paid: $24,134.95 Note: The monthly loan payment was calculated at 179 payments of $403.53 plus a final payment of $403.08 . It is estimated that you will need an annual salary of at least $48,423.60 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will devoted to repaying your student loans. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $32,282.40 , but you may experience some financial difficulty. These results assume that the student is paying the interest charges on any unsubsidized loans and is not capitalizing the interest while in school. If the student is capitalizing the interest, the cumulative payments and total interest charges will be higher than shown here. [/ QUOTE ] Here's my source. Here is another one: [ QUOTE ] Number of Monthly Payments 180 Simple Interest Rate 5.78 Principal Amount of Loan $ 48,500 Your Monthly Payment Will Be $ 403.52 Your Total Interest Cost Will Be $ 24,135.11 Minimum annual salary to handle these payments: $ 60,529.00 [/ QUOTE ] (anybody notice the recommended annual salaries to handle that amount of loan debt? Want to compare those numbers to CFI or first year F/O wages for fun?) [/soap box]

February 9th, 2005, 17:21	#16
IndianaPilot Senior Member Join Date: Jan 2005 Location: Indiana Posts: 423	Re: How difficult is it to get financing? Yeah Steve i see what your saying. I went to that loan calculator....it's very alarming lol. The only thing I dont understand, is how they come up with the minimum salary you need in order to afford to pay the loan off. I mean, there are many people out there, CFI's, regional FO's, or anybody that is out of college for that matter...that have very poor paying jobs and are somehow making it. There is something that I think we are missing.....I mean...there is a way to survive......theres a lot of living, walking proof out there of that. I mean.....myself. I have a loan out that i used for my private, plus i have a big truck payment. And i still rent aircraft a few times a month to go fly. I make only 30,000/yr at the fire dept, and i am comfortable. Still have some to put away, and i'm able to do everything i want.

February 10th, 2005, 03:51	#17
aloft Old Skool Join Date: Sep 2001 Location: Inside your OODA loop Posts: 7,011	Re: How difficult is it to get financing? It SHOULD be very alarming, considering you won't see a $48k salary for at least 4 years after taking out the loan. You guys need to do the math on how, as a flight instructor averaging $12-15k/yr BEFORE taxes, rent, food, car, etc, you're going to afford a $450/mo loan payment! $12k/yr, less 15% in taxes (actually, it'll be more than that, since ATP's instructors are "independent contractors", meaning that you'll have to pay self-employment taxes of 7.65%. We'll be generous and call it a 25% tax liability. $12k/yr = $1k/mo - 25% = $750 - $450 loan payment = $300 - $200 rent at an ATP apartment - $100. That means cell phone (you do know you're required to have a cell phone, right?), food, car (to say nothing of health insurance) has to come out of that remaining $100. And if you've got existing student loans (remember, you need that 4 year degree), you're simply screwed. Now, I'm sure some of you geniuses will suggest taking out enough of a loan so you can make your payments during the first two years or so while you're making next to nothing. That might work, but man, that's just stupid in my book. Long story short, think long and hard before taking out a loan that size.

February 10th, 2005, 12:33	#18
SmitteyB Old Skool Join Date: Nov 2004 Location: Ithaca, NY Posts: 1,957	Re: How difficult is it to get financing? I've got no other choice. Just have to get more work somewheres else while instructing to make ends meet. By the way, there are no fixed interest rates with Key Bank, if interest rates go up....your student loan interest rate will go up...called a "Variable Rate"... Brett

February 10th, 2005, 17:07	#19
IndianaPilot Senior Member Join Date: Jan 2005 Location: Indiana Posts: 423	Re: How difficult is it to get financing? Yep I hear what your saying Smittey...gotta do what makes it work for you. I plan on doing the same thing...I have a national registry paramedic liscense...which means it's good all over the country. I'll have to work a second job as a medic, just like i do now. Aloft, I understand what your sayin...but what do u suggest then ? I mean....a loan is the only way to cover a program cost like that. No way to pay that much as you go. And once again, there are tons and tons of guys out there right now...that have done it...and are making it.

February 10th, 2005, 17:10	#20
GaTechKid Old Skool Join Date: Aug 2003 Location: Frigid NWA Hub Posts: 1,885	Re: How difficult is it to get financing? Minor point to the overall theme of debt sucks, but it seems to me that you took too much out for taxes.

February 10th, 2005, 17:26	#21
IndianaPilot Senior Member Join Date: Jan 2005 Location: Indiana Posts: 423	Re: How difficult is it to get financing? Yeah GaTech i see what he's saying about looking at it realisticly.....but.....it has to work somehow. I just keep reminding myself...there are guys out there doing it....there IS a way. So why give up ??

February 10th, 2005, 19:21	#22
SmitteyB Old Skool Join Date: Nov 2004 Location: Ithaca, NY Posts: 1,957	Re: How difficult is it to get financing? I really don't think it is as impossible as he is saying. If it's a second job, so be it. I will do whatever it takes to get to a scheduled carrier. I agree that being an ATP instructor definitely sucks if you've got a payment that big coming. But hell...what do I know?

February 11th, 2005, 03:14	#23
aloft Old Skool Join Date: Sep 2001 Location: Inside your OODA loop Posts: 7,011	Re: How difficult is it to get financing? [ QUOTE ] Minor point to the overall theme of debt sucks, but it seems to me that you took too much out for taxes. [/ QUOTE ] If anything, I didn't take out enough. "Independent Contractor" means you'll pay 15.3% just in Social Security/Self Employment taxes. Your state and federal income taxes are on top of that.

February 11th, 2005, 22:17	#24
GaTechKid Old Skool Join Date: Aug 2003 Location: Frigid NWA Hub Posts: 1,885	Re: How difficult is it to get financing? So if a company, such as a flight school, treats its employees as "independent contractors" do they get out of paying the business share of social security/medicare taxes?

February 15th, 2005, 08:51	#25
Heath Senior Member Join Date: Oct 2003 Location: Bowling Green, KY Posts: 303	Re: How difficult is it to get financing? [ QUOTE ] So if a company, such as a flight school, treats its employees as "independent contractors" do they get out of paying the business share of social security/medicare taxes? [/ QUOTE ] Yup. The IC has to pay them under the name "self-employment" taxes.

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