BEWARE FIRST MERIT BANK!!!!

[flyby201]

I financed with the AOPA vendor (Bank of America) 5 1/2 years ago and have had no problems with them.  It seems to me someone was complaining about them on this site a while back, but a some point in the discussion admitted they were 3 or 4 months behind in their payments.  B of A's interest rate is (or at least was at that time) competitive and I think they pay your AOPA dues while you have the loan (not positive about that, though).

For those of you talking about front loaded interest...  It doesn't work like that.  Interest is calculated based on the amount of the principle.  When you start your loan the principal is high, so the amount of interest is more.  As the principle is whittled away the amount of interest charged decreases proportionally.  If you divide your interest rate by 365, that is your daily interest rate.  Multiply your principle balance by your daily interest rate and multiply that by the number of days since the bank received your last payment and that is the amount of interest you will be charged on any given payment.  If you pay additional principle with each payment, that will significantly reduce the total interest paid over the life of the loan.  You can also accererate your payments ,like making a payment (or 1/2 payment) every 2 weeks instead of once a month to reduce your total interest paid.

Check with MAPA or MOA.  They have several banks that advertise with them.  Your average banker doesn't know diddly about aircraft.  Deal with one of these banks that know aircraft financing, I think you will have a more pleasant experience .

[Earl]

Quote: flyby201

I financed with the AOPA vendor (Bank of America) 5 1/2 years ago and have had no problems with them.  It seems to me someone was complaining about them on this site a while back, but a some point in the discussion admitted they were 3 or 4 months behind in their payments.  B of A's interest rate is (or at least was at that time) competitive and I think they pay your AOPA dues while you have the loan (not positive about that, though).

For those of you talking about front loaded interest...  It doesn't work like that.  Interest is calculated based on the amount of the principle.  When you start your loan the principal is high, so the amount of interest is more.  As the principle is whittled away the amount of interest charged decreases proportionally.  If you divide your interest rate by 365, that is your daily interest rate.  Multiply your principle balance by your daily interest rate and multiply that by the number of days since the bank received your last payment and that is the amount of interest you will be charged on any given payment.  If you pay additional principle with each payment, that will significantly reduce the total interest paid over the life of the loan.  You can also accererate your payments ,like making a payment (or 1/2 payment) every 2 weeks instead of once a month to reduce your total interest paid.

Check with MAPA or MOA.  They have several banks that advertise with them.  Your average banker doesn't know diddly about aircraft.  Deal with one of these banks that know aircraft financing, I think you will have a more pleasant experience .

[carusoam]

Something to consider...

Keep your powder dry.  You may consider making your extra payment to your savings account.  You never know how to best use this cash.  I agree, paying down the "high interest" loan is a good idea.  I believe you may also want to consider keeping the flexibility prior to signing on with the new lender.  Depends on whether you may need the excess cash for something else....Suze Orman will agree, paying down your higher interest debt is always the best idea.....

I used Bank of America to finance my M20R originally.  One person (looking to purchase a plane) had complained that they required too much down payment.  It may have been up to 15% of the sales price at the time.  BofA was very profesional and can easily give you a quote and tell you what you need for downpayment (or equity).  Their agreement is not perfectly plain english, but you can read each paragraph and understand what it represents.   They can call back their loan if they want to...Expect that they use Vref (or similar) as their source of plane value.  You may also consider supplying your own prepared statement of what the plane is worth.  This will be important, since the 15% (down or equity) has to be based on some agreed total value specific to your plane.

As far as interest rates increasing...  Watch Ben Bernanke at the Federal Reserve.  When the FED raises the overnight lending rate, the aircraft loans will also increase.  until then, the aircraft loans will be market driven, but will still be tied to this (currently low) base rate.  As of this week the FED quarterly meeting indicated no increase in interest rate for a while.

As you may know, the FED controls interest rate based on theory of inflation vs. economic growth.  As long as the unemployment level is as high as it is (9.4%), our government will try to stimulate the economy until inflation becomes a problem.  History has shown interest rates have gone up .5% per quarter for a couple of years in a row until the economy is stifled again. 

You will want to have your loan in place before you see unemployment drop, housing sales increase and the stock market making new highs.  Once your long term loan is in place, inflation can be a good thing.

Best regards,

-a-

[jrwilson]

I used Red River State Bank twice.  I liked them.  Easy to deal with.