Using a Co-Borrower on an Aircraft Loan

In some cases, a single applicant may not meet a lender's strict requirements for an aircraft loan. In this situation, using a co-borrower can be a strategic way to strengthen your application and secure an approval.

When Does a Co-Borrower Make Sense?

A co-borrower is typically used to compensate for a weakness in the primary borrower's application. Common scenarios include:

• Insufficient Income or Cash Flow: If your debt-to-income ratio is too high, adding a co-borrower with strong income can improve the financial picture.
• Weaker Credit Profile: If your credit score is on the borderline, a co-borrower with an excellent credit history can provide the lender with additional confidence.
• Partnerships: In cases where two or more individuals are purchasing an aircraft together as partners.

What Lenders Require from a Co-Borrower

It is critical to understand that a co-borrower is not just a reference. They are vetted just as thoroughly as the primary borrower. They must submit a full application, including tax returns and a personal financial statement, and their credit will be pulled. The co-borrower is equally responsible for the debt and is legally obligated to make payments if the primary borrower defaults.

Co-Borrower vs. Guarantor

While similar, a co-borrower is on the loan from the beginning and is considered a co-owner of the debt. A guarantor, on the other hand, is someone who promises to pay the debt only if the primary borrower defaults. In aircraft financing, lenders almost always require co-borrowers rather than guarantors, as it provides them with a stronger legal position.