Aircraft loan offers come with their own vocabulary. Understanding the key terms lets you compare offers accurately and avoid surprises. This glossary explains the words you'll actually encounter, in plain English.
Key takeaways
- LTV, down payment, and term define the shape of your loan.
- Rate vs. APR — compare offers on APR, which includes certain costs.
- Balloon and amortization determine your payment and any lump sum due.
- Lien and escrow are how the secured loan is recorded and closed.
Loan Structure Terms
- Loan-to-value (LTV): the loan amount as a percentage of the aircraft's value. 80% LTV means 20% down.
- Down payment: the cash you put in up front; the inverse of LTV.
- Term: the length of the loan (e.g., 15 or 20 years).
- Amortization: the schedule by which principal is paid down over the term. Early payments are mostly interest.
- Balloon payment: a large lump sum due at the end of a term whose payments were calculated over a longer amortization — common on turbines and jets.
Rate & Cost Terms
- Interest rate: the cost of borrowing, expressed as a percentage.
- APR (annual percentage rate): the rate plus certain financing costs — the fairer basis for comparing offers.
- Fixed vs. variable: a fixed rate stays constant; a variable rate can change with an index.
- Prepayment penalty: a fee some lenders charge for paying off early — worth checking before you sign.
- Closing costs: fees to close the loan (documentation, escrow, title, filing).
Underwriting & Closing Terms
- DSCR (debt-service-coverage ratio): a measure of whether an aircraft's or business's cash flow covers the loan payment — used for business and charter buyers.
- Lien: the lender's recorded security interest in the aircraft (filed with the FAA), released at payoff.
- Escrow: a neutral third party that holds funds and handles title and closing.
- Pre-buy inspection: an inspection of the aircraft's condition, usually required before funding.
- Appraisal: a determination of the aircraft's market value.
Rates, terms, and figures in this article are illustrative examples for the 2026 market and are not offers of credit. Jaken Aviation is a licensed aircraft financing brokerage — a division of Jaken Finance Group — and does not make loan decisions. All financing is subject to lender approval. Tax information is general and not a substitute for advice from a qualified CPA.
Frequently Asked Questions
What does LTV mean on an aircraft loan?
Loan-to-value — the loan amount as a percentage of the aircraft's value. 80% LTV means you're putting 20% down.
What's the difference between rate and APR?
The interest rate is the cost of borrowing; the APR adds certain financing costs, making it the fairer basis for comparing offers.
What is DSCR?
Debt-service-coverage ratio — a measure of whether cash flow covers the loan payment. Lenders use it for business and charter aircraft buyers.
What is a balloon payment?
A large final payment on a loan whose regular payments were calculated over a longer amortization. It keeps payments low, with the balloon refinanced, paid, or covered by sale when due.
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