How do I fund my flight training?
We take a look at the different options available for funding flight training.
Assuming you don’t have a fairy Godmother who is about to bequeath you £100k for your pilot training the vast majority of potential pilots face a huge hurdle to getting on the first rung of the ladder. This guidance is based on the situation in the UK and some other countries will vary.
In days gone by some airlines would pay for training of cadets but those days are long gone and you are going to have to fund the training yourself today. Pilot training is not eligible for the UK student loan system unless you enrol on an undergraduate degree at a university however the student loan only covers the university degree and not the flight training.
For most people the reality is that you will need to borrow the money for your training and pay it back in the future.
As you might imagine integrated schools will help you with borrowing as part of their whole package of services. They have ‘tame’ lenders that will understand the aviation sector and lend either secured or unsecured, or even part secured part unsecured. Some airlines will provide ‘security’ for your loans through a bond scheme but in virtually all cases you will still have to pay that money back through a deduction to your salary when you start working. These schemes are invariably linked to integrated schools.
To make it clear secured borrowing means that you have provided ‘security’ to the lender in the form of property. Most younger trainees will not have any security to use but it is possible to use parents for example to provide security for your loan. However this assumes there is sufficient equity in that property, as in how much of a mortgage there is still outstanding on the property. Most lenders will only go to around 60% of the value of the property that is not currently covered by a mortgage.
Unsecured borrowing as the name suggests is where the lender will let you borrow without providing any security. This is a much higher risk for the lender and so to cover this additional risk they will usually charge a higher rate of interest on unsecured borrowing. Most lenders will have a limit on what they will lend unsecured so it is not unusual to have a blended loan that is partly secured and partly not.
Contrary to common opinion banks don’t lend for anything. Certain banks or finance houses ‘specialise’ in certain areas and markets that they fully understand the risk factors. This is where the integrated schools have a relationship with a particular lender that is mutually beneficial. Quite often the introducer (the integrated school) will do a lot of the admin work for the lender, for which they get paid, and the lender benefits from the introducers experience in their field. This is not unique to the airline industry. The other advantage of funding schemes affiliated with integrated schools is that the lender knows in detail how the training works and when the cadet needs the money and when they are likely to be able to pay it back. At the same time make sure you fully understand what you are committing yourself to as you can get yourself in a horrible financial mess if you can’t make the repayments. Remember sitting in a hold pool for an airline will not pay your finance !
For the modular route you are a bit more on your own but there are still people who will lend you money. The complication comes in that you may have to do a lot more explaining to the lender how the aviation industry works in terms of how you pay the money back. Whilst you don’t need all of the money up front when you are training in the modular way you do need to have a proper plan in place for where the money is going to come from. You really don’t want to get part way through your training and run out of money. Likewise expect delays in training and factor that into how you will repay the loan, you don’t want to be starting to repay your loan when you are half way through hour building because the weather has been rubbish.
The loans will be structured as before with or without security but I cannot emphasise enough that you must have all of the funding in place before you start. That doesn’t mean having all of the cash up front but knowing where it will come from.
It is possible to get the PPL level relatively cheaply, but the step on from there is where the costs mount up. This is especially the case when you get to the hour building and CPL end of the training.
It is also important to save as much as you can yourself before you start so that you have a financial reserve in the case of emergencies. For those leaving school this isn’t really an option but for those changing careers later in life this is all part of the planning.
Modular pilots will generally spend more time between getting their CPL and getting paid to fly. If you want to fly for an airline you are going to need a type rating which you most likely will have to pay for at least in part and you will only earn a relatively modest salary until you reach 500 hours so this needs to be taken into account when thinking about repayments. You may be sitting in an airline ‘hold pool’ for months, or even years in some cases, not getting paid.
Finally consider multiple options for obtaining the required funding as one single lender may not be willing to lend the full amount. They will also want to know about any other borrowing you have such as mortgages and car loans as well as you income.