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Taking out a loan or pay out of pocket?


A.J.
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I don't know if this topic has been discussed before or not.

I couldn't find any topics about this.

 

I know most people took out loans to pay for the training program.

 

Which would you do, take out a loan or pay out of pocket?

 

Which is cheaper?

 

If I had the money I would pay out of pocket, but I was talking to the owner of a heli school today and he said that it's cheaper to do the loan.

 

I'd also like to hear from you guys about the interest rates. I was told that I could get 8%.

 

What's the lowest interest rate you've gotten?

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The only way a loan is going to be cheaper than paying up front is if you have the 50-60K right now and are growing it at a higher rate than your APR for the loan. I'm not an accountant either but 8% seems kinda high for an educational loan, I pay 4% over 10yrs. Which would you rather do: hand over tear soaked checks for a year or two, or hand 'em over for 10?

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I don't know if this topic has been discussed before or not.

I couldn't find any topics about this. I know most people took out loans to pay for the training program.

 

Which would you do, take out a loan or pay out of pocket? Which is cheaper?

 

If I had the money I would pay out of pocket, but I was talking to the owner of a heli school today and he said that it's cheaper to do the loan.

 

I'd also like to hear from you guys about the interest rates. I was told that I could get 8%. What's the lowest interest rate you've gotten?

 

Of course it would be cheaper to "pay out of pocket" but that's not an option, right?

 

Probably the cheapest money you could borrow would be through a federal student loan program (starting July 1st the Stafford loans will be at 6.8% and the PLUS loans will be at 8.5%, both fixed) but, flight training doesn't qualify for these. So that's the floor, anything else is going to be higher.

 

A private loan (i.e., not federal) through Sallie Mae, if you're in an educational program like UVSC, or through a lender like Student Loan Xpress is going to be at a variable rate and, if it has a deferred interest feature, will add the accrued interest onto the loan amount. (Didn't you sign up for one of these with Silver State that you are now trying to get out of?).

 

The current variable rate on a Student Loan Xpress loan is nearly 10% (LIBOR plus 2.5 to 4.75%, count on it being at the high end of that range. The current LIBOR rate is 5.24% so the rate you'll pay will be 9.95%). Of course this rate might be only for those with sterling credit (i.e., a job) or a co-signor. I've read recently of folks having 13% loans.

 

If you borrow the $50k training cost and add up-front fees and deferred interest over two years to the loan you would be looking at making payments on about $60k when you finish training (and are making $18 an hour part-time as a CFI). At 10% over 20 years that would be a monthly payment of about $580.

 

This is why some folks go to Silver State and pay $20k more for 200 hours of flight time than they would at a pay-as-you-go school...because SSH makes the borrowing seem so easy. But $70k plus accrued interest and fees for 20 years is a monthly payment of about $740 a month. Ouch!! You'd better really love to spend time in a cockpit because with payments like that you're not going to own a house for a long time...if ever.

 

I pay 4% over 10yrs.

 

"4%", are you sure? Do you have a federal Stafford or PLUS loan? If so, did you know that the rates are going up on July 1st for existing loans to 7.14% and 7.94% respectively? Have you looked into consolidating and/or locking in your rate?

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Which would you do, take out a loan or pay out of pocket?

 

My current plan is to go oversea and save up the money.

 

1. It was suggested for me to wait another year before applying for my medical, (injury), which gives me time to do this. And

2. While I was away from home last year working in the GOM I had the dis-pleasure of ID theft which for now has my credit rating somewhere around nil. Guess that is what you get for always paying in cash. Nothing good to balance out the ID theft.

 

I figure this will also let me save enough that I can complete a good A&P course so I can do my second favorite thing. KEEP EM' FLYING

 

It was also suggested that even though I plan on having the money, to take out the loan for a good school anyway then pay on it for a year then pay it off, that would re-establish my credit and improve it.

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Take out a loan, or pay as you go? The question has been around since loans were first created. Each has plusses and minuses.

 

First...Pay as you go. The plus is that you would not be paying the interest on the loan, which could save you a good chuck of change in the long run. The minuses are several; not having the ability to pay $60k out of your pocket for the package. Paying more for your training because you are not getting the package discount because you are paying by the hour. Having to skip your next two lessons because the auto shop just billed you $700 to fix the transmission in your car. Taking forever to get through the training because you are paying by the hour (when you have the money), which results in taking longer to become proficient enough to get the next rating, which means it costs you more. The big one is that over 80% of people that start flight training on the pay as you go plan, NEVER FINISH because of lack of money to complete it.

 

Now...The loan. There are several plusses; first being that you can start your training right away without having to worry about how you are going to pay your rent next month. Second, you can keep right on training even though the auto shop just billed you $700 to fix the transmission in your car. Third, you can get the discounted package price that some schools offer. Fourth, loan programs like SallieMae have no prepayment penalty. Which means that while you are originally set up to repay them over 10-15 years, you can pay more per month, or pay them off in one lump sum with no penalty. There is one minus that I can tell; you are paying interest on the money you borrow.

 

My feeling is while paying interest to borrow the money may rub some the wrong way, getting a loan seems to make the most sense. Add in the fact that most people who start on the pay as you go plan never finish their training; maybe paying some interest on the loan could save you some money in the long run. I'd hate to see someone get $30,000 into their training and then have to stop because they can't afford it any longer.

 

Just my two-cents.

 

Doug

 

 

 

 

 

I'd also like to hear from you guys about the interest rates. I was told that I could get 8%.

 

You are correct, 8% is about the going rate.

 

Doug

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I've paid my way on my own... it's take about 3 years but I will have my CFI hopefully by the end of the month... I work full time and have a mortgage to pay but my heli training has kept me sane over the past few years...

 

Just my 2cents... which is about all I have now that I have paid for all this training!

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So whilst training, is it possible/practical to sustain a full time job 9-5 Mon - Fri for example and still finish the training within a reasonable time (ie not 3 years)?

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So whilst training, is it possible/practical to sustain a full time job 9-5 Mon - Fri for example and still finish the training within a reasonable time (ie not 3 years)?

 

That is going to depend on a couple of things. First is the school that you train at. If they have 30 students all with 9-5 jobs and only 3 helicopters, you chances of flying in the evening are marginal. Second is how far from where you live/work is the school. If the school is a two hour drive after you get off work, then don't look at getting much training done in the winter when it gets dark between 5:00PM and 6:00PM. You will be competing with the other part time students for weekend slots, so again, which school you go to will have the biggest impact on how long it will take to finish your training.

 

Doug

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So whilst training, is it possible/practical to sustain a full time job 9-5 Mon - Fri for example and still finish the training within a reasonable time (ie not 3 years)?

 

 

sure if your full time job pays well enough to pay for the course sooner :wacko:

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So whilst training, is it possible/practical to sustain a full time job 9-5 Mon - Fri for example and still finish the training within a reasonable time (ie not 3 years)?

 

While working full time (9 hrs min. daily, plus travel - sitting in front of a computer getting tired & tired; so much so it was hard to study), it took me almost exactly 3 yrs to get PPL, with school 2 hrs round trip.

 

If you can do it quicker - do it.

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While working full time (9 hrs min. daily, plus travel - sitting in front of a computer getting tired & tired; so much so it was hard to study), it took me almost exactly 3 yrs to get PPL, with school 2 hrs round trip.

 

If you can do it quicker - do it.

Damn, i really didnt appriciate that aspect of physically and mentally not being able to cope with work and training. Maybe it would be best to work before and save the money before starting, then just have a part time job at the weekends to then get in the weekly slots. All depending on the school like someone said.

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Where is there, currently available, an 8% rate?

 

The last student that I had that got one from Pilot Career Foundation was at 8% and I believe that SallieMae is about the same. Of course, as with most loans, the lower your credit score, the higher the interest rate can be.

 

Doug

 

BTW...I almost forgot to mention that the student didn't like that fact that the 8% loan was variable, so he found another loan source at 5% fixed.

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I'm paying for mine out of pocket. The $ from my regular job feeds the wife and kids and pays the bills. I mow a handful of lawns after work to pay for my flight training. It took me about five months to finish my PPL. The downside is that I have to do most of my training in the fall/winter months because I'm mowing my tail off the rest of the year. Also, it's hard on the self-motivation in 95 degree heat knowing that each lawn I mow pays for 6 minutes of flight time.

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I'm paying for mine out of pocket. The $ from my regular job feeds the wife and kids and pays the bills. I mow a handful of lawns after work to pay for my flight training. It took me about five months to finish my PPL. The downside is that I have to do most of my training in the fall/winter months because I'm mowing my tail off the rest of the year. Also, it's hard on the self-motivation in 95 degree heat knowing that each lawn I mow pays for 6 minutes of flight time.

 

 

Hat's off to ya...thats devotion at its best !

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The last student that I had that got one from Pilot Career Foundation was at 8% and I believe that SallieMae is about the same. Of course, as with most loans, the lower your credit score, the higher the interest rate can be.

 

Doug

 

BTW...I almost forgot to mention that the student didn't like that fact that the 8% loan was variable, so he found another loan source at 5% fixed.

 

The Pilot Career Foundation didn't make loans they were just an intermediary between their member- borrowers and KeyBank (just like Silver State). That relationship is no more since KeyBank stopped making flight training loans.

 

There are no 5% fixed loans anywhere...except maybe parents. Even mortgage loans are currently over 6%...and that would have to be a first not a second or a LOC.

 

The absolute best rate that SallieMae is offering to someone who is not in a university program is prime+1% (9%) and that is only for "excellent" credit, which of course no one qualifies for. "Good" credit can get prime+3% (11%) and "fair" credit...get this...prime+9% (17%).

 

So cutting through all the out-of-date speculation and hearsay, it appears that the best loan rate currently available for flight training is about 10%...that would be a variable rate...with very good credit or a co-signor with very good credit.

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The Pilot Career Foundation didn't make loans they were just an intermediary between their member- borrowers and KeyBank (just like Silver State). That relationship is no more since KeyBank stopped making flight training loans.

 

There are no 5% fixed loans anywhere...except maybe parents. Even mortgage loans are currently over 6%...and that would have to be a first not a second or a LOC.

 

The absolute best rate that SallieMae is offering to someone who is not in a university program is prime+1% (9%) and that is only for "excellent" credit, which of course no one qualifies for. "Good" credit can get prime+3% (11%) and "fair" credit...get this...prime+9% (17%).

 

So cutting through all the out-of-date speculation and hearsay, it appears that the best loan rate currently available for flight training is about 10%...that would be a variable rate...with very good credit or a co-signor with very good credit.

 

You are correct is stating the PFC is a go between for the students and the banks. The 8% loan the student got was just the past December. The student is a 50 year old business owner and did not go to his parents when looking for a better loan than through PFC (it was a Key Bank loan), but instead went to his bank and received a 5% fixed rate for the loan.

 

FYI, I only post facts and not out of date speculation and hearsay. You might do yourself a favor and pay attention to what others in the industry have to say instead of taking pot shots at them. You state that no one has the "excellent" credit to qualify for the lowest interest rate that SallieMae has available. Do you have facts to back this statement up, or is this just speculation and hearsay on your part?

 

Doug

 

BTW, a friend of mine with "excellent" credit just secured a LOC at 6.99%.

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You are correct is stating the PFC is a go between for the students and the banks. The 8% loan the student got was just the past December. The student is a 50 year old business owner and did not go to his parents when looking for a better loan than through PFC (it was a Key Bank loan), but instead went to his bank and received a 5% fixed rate for the loan.

 

FYI, I only post facts and not out of date speculation and hearsay. You might do yourself a favor and pay attention to what others in the industry have to say instead of taking pot shots at them. You state that no one has the "excellent" credit to qualify for the lowest interest rate that SallieMae has available. Do you have facts to back this statement up, or is this just speculation and hearsay on your part?

 

Doug

 

BTW, a friend of mine with "excellent" credit just secured a LOC at 6.99%.

 

The word "excellent" with regards to creditor quality is used by Sallie Mae at its website. Very easy to confirm. The term is used along with "good" and "fair" in an example of rates and terms available under the various program. Basically, it's a good-better-best price comparison with "excellent" having a 9% rate, "good" 11% and "fair" 17%. The life experience of any adult over the age of 20 will tell them that the vast majority of "buyers" will qualify within the middle category. The other two categories are a marketing gimmick presented to give the appearance of choice or range. That is what I based my comment on that "no one qualifies" for the "excellent" rate.

 

As far as 5% fixed rate loans and 6.99% LOCs go, either these are secured loans and/or special circumstances between the lendor and the borrower or your student and your friend were not entirely forecoming with you. For the vast majority of prospective students looking to finance a program of vocational flight instruction such loan arrangements are not available. So why bother bringing up such extreme examples?

 

The only generally available loan programs I see out there for flight training are obtained through Sallie Mae or through companies like Student Loan Xpress. Both of these are intermediaries...i.e., they do not make loans directly they handle marketing and administration for the banks that provide the funds. The underlying banks all provide similar loan rates and terms because they are competitive. Generally for loans to borrowers of a similar profile...e.g., students with no security...the rates and terms offered by all the banks will fall within the same range. The variety within the range depends on the credit profile of the indivual borrower. At this time for students not in a university program looking for an unsecured loan the available loan programs are variable, some have payment deferral features and the rates run between 10% and 17% depending on the borrower's or the co-signor's credit rating.

 

If you know of any others then by all means answer the original poster's question but, stories about a friend-of-a-friend who once got this-or-that rate on a loan aren't really much help.

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... So why bother bringing up such extreme examples?

As a direct response to statements such as "There are no 5% fixed loans anywhere..." and "...cutting through all the out-of-date speculation and hearsay...", etc., but you knew that before you replied.

 

The only generally available loan programs I see out there...

Just a guess, but maybe you don't see every possible source of flight training funding available to every person that applies for it.

 

If you know of any others then by all means answer the original poster's question but, stories about a friend-of-a-friend who once got this-or-that rate on a loan aren't really much help.

Neither are posts like yours that seek to discredit what is a valid response to the statements you've made.

 

Bob

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The word "excellent" with regards to creditor quality is used by Sallie Mae at its website. Very easy to confirm. The term is used along with "good" and "fair" in an example of rates and terms available under the various program. Basically, it's a good-better-best price comparison with "excellent" having a 9% rate, "good" 11% and "fair" 17%. The life experience of any adult over the age of 20 will tell them that the vast majority of "buyers" will qualify within the middle category. The other two categories are a marketing gimmick presented to give the appearance of choice or range. That is what I based my comment on that "no one qualifies" for the "excellent" rate.

 

As far as 5% fixed rate loans and 6.99% LOCs go, either these are secured loans and/or special circumstances between the lendor and the borrower or your student and your friend were not entirely forecoming with you. For the vast majority of prospective students looking to finance a program of vocational flight instruction such loan arrangements are not available. So why bother bringing up such extreme examples?

 

The only generally available loan programs I see out there for flight training are obtained through Sallie Mae or through companies like Student Loan Xpress. Both of these are intermediaries...i.e., they do not make loans directly they handle marketing and administration for the banks that provide the funds. The underlying banks all provide similar loan rates and terms because they are competitive. Generally for loans to borrowers of a similar profile...e.g., students with no security...the rates and terms offered by all the banks will fall within the same range. The variety within the range depends on the credit profile of the indivual borrower. At this time for students not in a university program looking for an unsecured loan the available loan programs are variable, some have payment deferral features and the rates run between 10% and 17% depending on the borrower's or the co-signor's credit rating.

 

If you know of any others then by all means answer the original poster's question but, stories about a friend-of-a-friend who once got this-or-that rate on a loan aren't really much help.

 

So you do not have factual data to back up your claim that "no one qualifies" for the "excellent" rate. Making a statement such as that without factual data to back it up it seems a bit extreme to me.

 

I have no reason to doubt the validity of what either the student or my friend told me. What would there be to gain by telling falsehoods about interest rates?

 

I'm not certain what life experience you are talking about needing to be over the age of 20 to have in regards to whether or not you have excellent credit. Maybe you are talking about your own personal experience.

 

In regards to the original posters question; he asked about a loan, not specifically a non-secured student loan. And isn't it a bit presumptious of you to assume that he doesn't have "excellent" credit and isn't capable of getting a 5% fixed rate loan from his bank? One of his questions was what was the lowest rate gotten. Well I answered him that 5% is the lowest that I have currently seen.

 

I'm not certain where your desire to discredit my replies is coming from, but I have a feeling that the only person you are discrediting is yourself.

 

Doug

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In regards to the original posters question; he asked about a loan, not specifically a non-secured student loan. And isn't it a bit presumptious of you to assume that he doesn't have "excellent" credit and isn't capable of getting a 5% fixed rate loan from his bank? One of his questions was what was the lowest rate gotten. Well I answered him that 5% is the lowest that I have currently seen.

 

Ok, there's one valid point there...i.e., can someone looking for flight training funding reasonably expect to get what the lenders advertise as their best rates for an "excellent" credit report?

 

The lenders use the FICO credit scores which range from about 650 to 850 (the scores actually go below 650 but no lender is going to give an unsecured loan to a score that low). According FairIssacs, the developer of the score, the distribution of scores in the US population runs:

650-699 15%

700-749 18%

750+ 40%

 

An "excellent" score might be generously considered to be a score above 720 (This is an estimation from info on the FairIssacs website but they are not a lender and lenders will generally not divulge their credit requirements until a lender actually applies for a loan). So it would seem that, theoretically, more than 40% of the population would have an "excellent" score and could therefore qualify for the lender's best rate.

 

But, that 40% includes a lot of people who are over 30 years old, own their own homes and have had a credit history for a number of years. That's not generally the profile of a beginning flight student. But, when I said that the range of rates available is from 10% to 17%, that should be modified to include the small percentage (IMO) of students who can qualify for a 9% rate.

 

As far as your other points, do you really think the orignal poster was asking, "what was the lowest rate gotten"...like he was conducting a poll? He obviously wanted to know what rates are currently available and, no, there are no 5% loans available anywhere except maybe from one's parents.

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The absolute best rate that SallieMae is offering to someone who is not in a university program is prime+1% (9%) and that is only for "excellent" credit, which of course no one qualifies for.

 

 

An "excellent" score might be generously considered to be a score above 720 (This is an estimation from info on the FairIssacs website but they are not a lender and lenders will generally not divulge their credit requirements until a lender actually applies for a loan). So it would seem that, theoretically, more than 40% of the population would have an "excellent" score and could therefore qualify for the lender's best rate.

 

So, which is it, no one qualifies for it, or 40% of the people qualify for it? There are plenty of people in their 30's that are looking for a career change and have the credit to qualify for the lowest rate available. As I stated previously; isn't it a bit presumptious of you to assume that he doesn't have "excellent" credit and isn't capable of getting a 5% fixed rate loan from his bank? Which as I stated earlier, is a loan rate that a student currently training with us secured from his bank this year, and not from his parents. And yes, the original post did ask about lowest rate gotten, not the average rate of someone with good credit or fair credit receives.

 

Again, I post facts as I know them to be, and not speculation and hearsay. I'm not sure where your desire to discredit what I say is coming from, but it serves no purpose and I still have the same feeling that the only person it discredits is you.

 

Doug

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So, which is it, no one qualifies for it, or 40% of the people qualify for it? There are plenty of people in their 30's that are looking for a career change and have the credit to qualify for the lowest rate available. As I stated previously; isn't it a bit presumptious of you to assume that he doesn't have "excellent" credit and isn't capable of getting a 5% fixed rate loan from his bank? Which as I stated earlier, is a loan rate that a student currently training with us secured from his bank this year, and not from his parents. And yes, the original post did ask about lowest rate gotten, not the average rate of someone with good credit or fair credit receives.

 

Again, I post facts as I know them to be, and not speculation and hearsay. I'm not sure where your desire to discredit what I say is coming from, but it serves no purpose and I still have the same feeling that the only person it discredits is you.

 

Doug, we've got to stop meeting like this. This is fun but we're starting to go in circles here so this is my last go at this. I can say with virtual certainty that a 5% rate is not available to any individual borrower...not even one with "excellent" credit on a secured basis...AT THE PRESENT TIME. Why is that? Because Treasury bills are paying greater than 5% and a lender is not going to lend at a lower rate of return than they could get by just buying Treasuries. There is no risk of non-repayment with a Treasury so why would they make a loan with more risk for less return? Now, could someone maybe get a secured 5% VARIABLE loan currently? Possibly, but that would only be a teaser rate that is going to adjust to market at the first adjustment date...so that's not really "a 5% loan".

 

If you interpreted the original poster's question as a poll on the lowest rates ever gotten by a flight student then I suppose your answer was factual. I thought he wanted information that would help him understand how to finance his flight training currently.

 

Take care

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