My Aircraft Loan Term is Ending: What Now? (Balloon Payments)

Many aircraft loans are structured with a shorter term than the amortization period, resulting in a balloon payment at the end of the term. If your 5, 7, or 10-year loan term is coming to an end, it's important to plan ahead. You have three main options.

Understanding Your Balloon Payment

A balloon payment is the large, lump-sum principal balance that remains at the end of your loan term. Because your monthly payments were calculated over a longer amortization schedule (e.g., 20 years), you haven't paid off the full loan amount. The lender now requires the remaining balance to be paid in full.

Your Three Main Options

1. Refinance the Balloon Payment

This is the most common choice. You essentially take out a new loan to pay off the balloon amount. This allows you to continue making manageable monthly payments. It's also an excellent opportunity to secure a better interest rate if market conditions have improved.

2. Pay the Balance in Full

If you have the available capital, you can pay off the balloon payment in cash. This makes you the outright owner of the aircraft, free and clear of any liens.

3. Sell the Aircraft

The end of the loan term can be a logical time to upgrade or change your aircraft. You can sell the aircraft, use the proceeds to pay off the balloon payment and your broker, and then use any remaining equity as a down payment on your next plane.