Refinancing Your Aircraft Loan: When to Do It and How to Get the Best Rates

Published January 11, 2026 | Aircraft Loan Refinancing

Aircraft loan refinancing offers aircraft owners the opportunity to reduce monthly payments, lower interest rates, access equity, or restructure loan terms to better align with current financial goals. With interest rates fluctuating and personal financial situations evolving, understanding when to refinance aircraft loan obligations and how to secure the best aircraft refinancing rates can save tens of thousands of dollars over the life of your loan. This comprehensive guide examines optimal refinancing timing, provides an aircraft refinancing calculator framework, reveals strategies for obtaining competitive refinance aircraft loan rates, and walks you through the complete aircraft loan refi process from application to closing.

When Should You Refinance Your Aircraft Loan?

Timing is critical for maximizing aircraft loan refinancing benefits:

Interest Rate Reduction Opportunities

The most common refinancing trigger—lower interest rates:

The 1% Rule of Thumb:

Traditional guideline: Refinance when rates drop 1% or more below current rate
Modern reality: Even 0.5-0.75% reduction can justify refinancing
Break-even analysis: Calculate months to recoup closing costs
Long-term savings: Focus on total interest saved over remaining loan term
Rate environment: Consider whether rates likely to drop further

Savings Calculation Example:

Current loan: $1,500,000 balance, 7.5% rate, 8 years remaining

Current monthly payment: $20,156
Total remaining payments: $1,935,000 (96 months)
Refinance at 6.5%: $19,234/month
New total payments: $1,846,464
Interest savings: $88,536 over 8 years
Monthly savings: $922
Refinancing costs: $15,000-$25,000
Break-even: 16-27 months
Net savings: $63,536-$73,536 after costs

Credit Score Improvement

Better credit unlocks significantly lower rates:

Credit Score Impact on Rates:

650-680 credit: 8.5-10% interest rates
680-720 credit: 7.5-8.5% interest rates
720-760 credit: 6.5-7.5% interest rates
760+ credit: 5.5-6.5% interest rates (best rates)
Rate difference: 2-4% between poor and excellent credit

Credit Improvement Refinancing Example:

Original loan: $2,000,000, 9% rate (680 credit score)

After credit improvement: 750 credit score
New rate available: 6.5%
Rate reduction: 2.5 percentage points
Monthly payment reduction: $3,500
Annual savings: $42,000
10-year savings: $420,000
ROI: Massive return on refinancing costs

Credit Improvement Strategies:

Pay down credit cards: Reduce utilization below 30%
On-time payments: Perfect payment history for 12+ months
Dispute errors: Challenge inaccuracies on credit reports
Reduce inquiries: Avoid new credit applications
Increase limits: Request credit limit increases (don't use them)
Timeline: 6-12 months to significantly improve score

Cash-Out Refinancing for Equity Access

Tap aircraft equity for business or personal needs:

When Cash-Out Makes Sense:

Aircraft upgrades: Fund avionics, engine, or interior improvements
Business expansion: Capital for business growth opportunities
Debt consolidation: Pay off higher-interest debt
Emergency fund: Build cash reserves for unexpected expenses
Tax planning: Strategic timing for tax benefits

Cash-Out Refinancing Example:

Aircraft value: $2,500,000
Current loan balance: $1,200,000
Available equity: $1,300,000
Maximum LTV: 80% ($2,000,000 loan)
Cash-out amount: $800,000 ($2M new loan - $1.2M payoff)
New monthly payment: Higher due to larger loan
Use of funds: $500K avionics upgrade, $300K business investment

Cash-Out Considerations:

Higher payment: Larger loan increases monthly obligation
Reduced equity: Less ownership stake in aircraft
Interest cost: Pay interest on cash-out amount
Tax implications: Cash-out may have tax consequences
Risk assessment: Ensure cash-out use generates positive ROI

Loan Term Restructuring

Adjust loan duration to match financial goals:

Shorten Loan Term:

Goal: Pay off aircraft faster, save on interest
Example: Refinance 10-year loan to 5-year term
Higher payments: Monthly payment increases
Interest savings: Substantial reduction in total interest
Best for: Improved income, desire to own aircraft outright

Extend Loan Term:

Goal: Reduce monthly payment, improve cash flow
Example: Refinance 5-year loan to 10-year term
Lower payments: Monthly obligation decreases
More interest: Pay more interest over extended term
Best for: Cash flow challenges, business investment opportunities

Term Restructuring Example:

Current loan: $1,500,000 balance, 7% rate, 5 years remaining

Current payment: $29,702/month
Option A - Shorten to 3 years: $46,204/month, save $85,000 interest
Option B - Extend to 10 years: $17,415/month, pay $140,000 more interest
Decision factors: Cash flow needs, total cost tolerance, ownership timeline

Balloon Payment Approaching

Refinance balloon loans before payment due:

Balloon Refinancing Timeline:

18-24 months before: Begin researching refinancing options
12 months before: Apply to multiple lenders for pre-approval
6 months before: Lock in rate and finalize loan terms
3 months before: Complete underwriting and prepare for closing
1 month before: Close refinancing, pay off balloon

Balloon Refinancing Options:

Traditional refinance: New fully-amortizing loan
Another balloon: Extend with new balloon (kicks can down road)
Hybrid structure: Partially amortizing with smaller balloon
Cash-out refi: Access equity while refinancing balloon
Sell aircraft: Alternative to refinancing if market favorable

How to Get the Best Aircraft Refinancing Rates

Strategic approach to securing best aircraft refinancing rates:

Optimize Your Financial Profile

Strengthen your application before applying:

Credit Score Optimization:

Target score: 750+ for best rates
Credit utilization: Keep below 30% on all cards
Payment history: 12+ months of perfect payments
Credit mix: Diverse credit types (cards, loans, mortgage)
Account age: Maintain older accounts for history length
Timing: Improve credit 6-12 months before refinancing

Debt-to-Income Ratio:

Target DTI: Below 40% (including new aircraft payment)
Calculation: Total monthly debt ÷ gross monthly income
Improvement strategies: Pay down debt, increase income
Documentation: Prepare proof of income (tax returns, bank statements)
Business income: Show 2+ years of consistent business revenue

Aircraft Equity Position:

Optimal LTV: 70-75% loan-to-value for best rates
Maximum LTV: 80-85% (higher rates, stricter terms)
Equity building: Make extra principal payments before refinancing
Aircraft value: Maintain aircraft to preserve value
Appraisal: Professional appraisal may show higher value

Shop Multiple Lenders

Competition drives better rates and terms:

Lender Types to Consider:

Specialized aviation lenders: Best rates, understand aircraft financing
Regional banks: Competitive rates for existing customers
Credit unions: Often lower rates, member-focused
Online lenders: Fast approval, competitive rates
Current lender: May offer retention rate to keep your business

Rate Shopping Strategy:

Apply to 3-5 lenders: Within 14-day window (counts as single inquiry)
Compare APR: Not just interest rate (includes fees)
Negotiate: Use competing offers to negotiate better terms
Lock rates: Lock favorable rate while shopping continues
Read fine print: Understand all fees, penalties, terms

Rate Comparison Example:

Lender A: 6.25% rate, $15,000 fees, 6.45% APR
Lender B: 6.50% rate, $8,000 fees, 6.60% APR
Lender C: 6.00% rate, $22,000 fees, 6.35% APR
Best choice: Depends on loan amount and term
Analysis: Calculate total cost over full loan term

Timing Your Refinance

Market timing can save thousands:

Interest Rate Environment:

Falling rates: Wait if rates declining (unless urgent need)
Rising rates: Act quickly to lock current rates
Rate stability: Refinance when rates favorable vs your current loan
Fed policy: Monitor Federal Reserve rate decisions
Economic indicators: Watch inflation, employment data

Personal Timing Factors:

Tax year: Consider tax implications of refinancing timing
Business cycle: Refinance when business financials strong
Prepayment penalty: Wait until penalty period expires
Aircraft maintenance: Complete major maintenance before appraisal
Life events: Avoid refinancing during major life changes

Negotiate Fees and Terms

Everything is negotiable in aircraft financing:

Negotiable Items:

Interest rate: Request 0.25-0.50% reduction
Origination fee: Negotiate from 1% to 0.5% or waive
Appraisal fee: Request lender to cover or reduce
Processing fees: Challenge unnecessary fees
Prepayment penalty: Negotiate removal or reduction
Loan term: Customize term to your needs

Negotiation Leverage:

Excellent credit: 750+ score gives strong negotiating position
Substantial equity: 30%+ equity reduces lender risk
Competing offers: Use other lenders' quotes as leverage
Existing relationship: Loyalty may earn better terms
Large loan: Higher loan amounts justify fee reductions

Ready to Refinance Your Aircraft Loan?

Jaken Aviation specializes in aircraft loan refinancing and helps owners secure the best aircraft refinancing rates available. Our aviation finance experts shop multiple lenders, negotiate favorable terms, and guide you through the entire refinancing process.

Get Refinancing Quote

Questions about refinancing? Call 833-264-7776 to speak with a refinancing specialist.

The Aircraft Loan Refinancing Process: Step-by-Step Guide

Complete walkthrough of aircraft loan refi from start to finish:

Step 1: Evaluate Refinancing Benefits

Determine if refinancing makes financial sense:

Refinancing Calculator Framework:

Current loan details: Balance, rate, term, monthly payment
New loan estimate: Proposed rate, term, fees
Monthly savings: Current payment - new payment
Total interest savings: Current total interest - new total interest
Refinancing costs: All fees and closing costs
Break-even point: Months to recoup refinancing costs
Net savings: Total savings - refinancing costs

Example Calculation:

Current loan: $1,800,000 balance, 7.5% rate, 10 years remaining
Current payment: $21,356/month
Total remaining: $2,562,720
New loan: $1,800,000, 6.0% rate, 10 years
New payment: $19,980/month
New total: $2,397,600
Monthly savings: $1,376
Total savings: $165,120
Refinancing costs: $25,000
Break-even: 18 months
Net savings: $140,120

Step 2: Gather Required Documentation

Prepare comprehensive application package:

Personal Financial Documents:

Tax returns: Last 2 years personal and business returns
Bank statements: 3-6 months all accounts
Pay stubs: Recent pay stubs if W-2 employee
Investment statements: Brokerage, retirement accounts
Credit report: Recent credit report (lender will pull official)
Debt schedule: List of all debts with balances and payments

Aircraft Documentation:

Aircraft registration: Current FAA registration
Logbooks: Complete airframe, engine, propeller logs
Maintenance records: Recent maintenance and inspections
Current loan documents: Existing loan agreement, payment history
Insurance: Current insurance policy and declarations
Appraisal: Recent appraisal if available (lender will order new one)

Step 3: Apply to Multiple Lenders

Submit applications within 14-day window:

Application Process:

Online applications: Complete lender online forms
Phone applications: Call lenders for personalized service
Broker assistance: Use aircraft finance broker to shop multiple lenders
Timing: Submit all applications within 14 days (single credit inquiry)
Follow-up: Respond promptly to lender requests

What Lenders Evaluate:

Credit score: 700+ required, 750+ for best rates
Debt-to-income: Below 40% preferred
Aircraft value: Loan-to-value ratio 80% maximum
Payment history: Current loan payment record
Income stability: 2+ years consistent income
Aircraft condition: Well-maintained, current on inspections

Step 4: Compare Offers and Negotiate

Analyze all offers comprehensively:

Comparison Factors:

Interest rate: Lower is better, but consider APR
APR: Includes all fees, true cost comparison
Loan term: Match to your ownership timeline
Monthly payment: Ensure affordable for cash flow
Total cost: Sum of all payments over loan life
Fees: Origination, appraisal, processing, closing
Prepayment penalty: Avoid if possible
Flexibility: Options for payment changes, deferrals

Negotiation Strategy:

Use best offer: Present to other lenders for matching
Request fee waivers: Ask to waive or reduce fees
Rate reduction: Request 0.25% rate decrease
Term flexibility: Negotiate custom loan term
Final decision: Choose lender offering best overall value

Step 5: Lock Your Rate

Protect against rate increases during processing:

Rate Lock Considerations:

Lock period: 30-60 days typical
Lock fee: May cost 0.25-0.50% of loan amount
Float option: Risk rates rising, opportunity for decrease
Float-down: Some lenders offer float-down if rates drop
Extension: May extend lock for fee if closing delayed

Step 6: Complete Underwriting

Lender verifies all information:

Underwriting Process:

Document verification: Lender confirms all submitted documents
Credit check: Hard credit pull (already counted in 14-day window)
Income verification: Confirm employment, business revenue
Aircraft appraisal: Professional appraisal ordered ($2,500-$5,000)
Title search: Verify clean title, no liens
Insurance verification: Confirm adequate coverage
Conditions: Lender may request additional documentation

Timeline:

Initial review: 3-5 business days
Appraisal: 1-2 weeks
Final underwriting: 1-2 weeks
Total time: 30-45 days from application to closing

Step 7: Close the Refinance

Finalize new loan and pay off existing loan:

Closing Process:

Review closing disclosure: Verify all terms, fees, amounts
Sign loan documents: Promissory note, security agreement, etc.
Pay closing costs: Wire transfer or cashier's check
Payoff existing loan: New lender pays off old loan
Lien release: Old lender releases lien on aircraft
New lien filing: New lender files lien with FAA
First payment: Typically due 30-45 days after closing

Closing Costs:

Origination fee: 0.5-1.5% of loan amount
Appraisal: $2,500-$5,000
Title search: $500-$1,500
Attorney fees: $1,000-$3,000
Recording fees: $100-$500
Escrow fees: $500-$1,500
Total costs: $15,000-$35,000 typical

Frequently Asked Questions

When is the best time to refinance my aircraft loan?

When to refinance aircraft loan depends on several factors: (1) Interest rates: When rates 0.5-1% below your current rate, (2) Credit improvement: After credit score increases 50+ points, (3) Equity position: When you have 20%+ equity in aircraft, (4) Balloon approaching: 12-18 months before balloon payment due, (5) Cash flow needs: When you need lower monthly payments. Calculate break-even point—if you'll own aircraft longer than break-even period, refinancing makes sense. Avoid refinancing if prepayment penalty exceeds savings or if you plan to sell aircraft soon.

How much can I save by refinancing my aircraft loan?

Savings depend on rate reduction and remaining loan term. Use this aircraft refinancing calculator framework: Example: $1.5M balance, 7.5% current rate, 8 years remaining. Refinance to 6.5% saves $922/month and $88,536 total interest. After $20,000 refinancing costs, net savings = $68,536. Larger savings with: (1) Bigger rate reduction (2% drop = $3,500/month savings), (2) Larger loan balance ($3M loan doubles savings), (3) Longer remaining term (10 years vs 5 years). Calculate your specific savings before refinancing to ensure positive ROI.

What credit score do I need to refinance an aircraft loan?

Minimum credit scores for aircraft loan refinancing: (1) 650-680: May qualify but higher rates (8-9%), (2) 680-720: Standard approval, competitive rates (7-8%), (3) 720-760: Good rates (6-7%), (4) 760+: Best rates available (5.5-6.5%). Lenders also consider: debt-to-income ratio (below 40%), payment history on current loan (must be perfect), aircraft equity (20%+ preferred), income stability (2+ years). If credit below 700, focus on improvement before refinancing—50-point increase can save $50,000+ over loan life.

Can I refinance if my aircraft value has decreased?

Yes, but options limited if underwater (owe more than aircraft worth). Scenarios: (1) Positive equity: No problem, refinance normally, (2) Break-even: May refinance with higher rate or fees, (3) Slightly underwater (5-10%): Some lenders allow with excellent credit, (4) Significantly underwater (10%+): Very difficult, may need to bring cash to closing. Solutions: (1) Make extra principal payments to build equity, (2) Wait for aircraft value to recover, (3) Bring cash to closing to reach 80% LTV, (4) Consider keeping current loan. Maintain aircraft well to preserve value—deferred maintenance accelerates depreciation.

How long does aircraft loan refinancing take?

Typical aircraft loan refi timeline: (1) Application: 1-2 days to complete and submit, (2) Initial review: 3-5 business days for preliminary approval, (3) Appraisal: 1-2 weeks to schedule and complete, (4) Underwriting: 1-2 weeks to verify all information, (5) Closing: 3-5 days to finalize documents, (6) Total time: 30-45 days from application to closing. Expedite process by: (1) Having all documents ready upfront, (2) Responding quickly to lender requests, (3) Maintaining aircraft in excellent condition, (4) Using experienced aviation lender. Delays occur from: incomplete documentation, appraisal issues, title problems.

What fees are involved in refinancing an aircraft loan?

Typical refinancing costs: (1) Origination fee: 0.5-1.5% of loan amount ($7,500-$22,500 on $1.5M loan), (2) Appraisal: $2,500-$5,000, (3) Title search: $500-$1,500, (4) Attorney fees: $1,000-$3,000, (5) Recording fees: $100-$500, (6) Escrow fees: $500-$1,500, (7) Total costs: $15,000-$35,000 typical. Some fees negotiable—request lender to waive or reduce origination fee, cover appraisal cost. Calculate break-even: if monthly savings $1,000 and costs $20,000, break-even in 20 months. Refinancing makes sense if you'll own aircraft beyond break-even period.

Should I refinance to a shorter or longer loan term?

Depends on financial goals: Shorter term (5-7 years): (1) Higher monthly payments, (2) Pay off aircraft faster, (3) Save substantial interest, (4) Build equity quickly, (5) Best for: strong cash flow, desire to own outright. Longer term (10-15 years): (1) Lower monthly payments, (2) Improved cash flow, (3) Pay more total interest, (4) Slower equity building, (5) Best for: cash flow constraints, investment opportunities. Example: $1.5M loan at 6.5%: 5-year term = $29,300/month, $258,000 interest; 10-year term = $16,980/month, $537,600 interest. Choose based on: monthly budget, total cost tolerance, ownership timeline, alternative investment returns.

Can I refinance an aircraft loan with a balloon payment?

Yes, refinancing balloon loans is common and recommended. Start 12-18 months before balloon due. Options: (1) Traditional refinance: New fully-amortizing loan, no balloon, (2) Another balloon: Extend with new balloon (delays problem), (3) Hybrid: Partially amortizing with smaller balloon, (4) Cash-out refi: Access equity while refinancing balloon. Example: $1M balloon due in 12 months, refinance to 10-year loan at 6.5% = $11,320/month (vs paying $1M lump sum). Benefits: (1) Avoid large cash outlay, (2) Maintain liquidity, (3) Potentially lower rate than original loan, (4) Predictable payments. Don't wait until last minute—start refinancing process early to ensure approval before balloon due.