Fast Track (LOAN) vs Pay as I Go (Slow)

ryanmiels

Well-Known Member
Hi,
I am a 25 year old aspiring professional pilot, currently training at a part 61 flight school, working on my instrument rating. I currently have a little over 100 hours. I currently have no debt, but as my savings is drying up quickly I am thinking about taking on some through a credit card, to keep up my pace.

My goal is also to have my commercial by this time next year. I also feel it is beneficial in a learning sense, that I absorb and retain more information, and become more proficient faster.

Anyone have any advice paying for flight training with a credit card? I feel a credit card would be a better way to go since most have 0% APR introductory rates for the first year or so. I could start paying off the debt month by month for the first year with no interest, opposed to a bank/personal loan where I would be paying interest right off the bat.

Thanks!
 

rframe

pǝʇɹǝʌuı
No.

Lets say $25000 to get you to 250 hours which would hopefully give you Com/Inst/CFI where you can go start earning some big money.

Minimum payment on a $25,000 credit card balance is $600/month. That would take you 5 years to pay it off if you continued at $600/month..... so how realistic is that?

As a CFI flying 60 hours per month (relatively busy) at $20/hour you make $1,200 per month pre-tax. Minus $300 month in taxes, $900 to live on. Minus $600 monthly debt payment leaves you $300 month to pay for rent, food, car, gas, clothes, health. That's for the next 5 years of your life.
 

Matt13C

Well-Known Member
I would caution against it. Remember, the introductory period is only a year as you said, after that depending on your credit rating the rate jumps substantially. Your only option then is to transfer the balance, which results in a balance transfer fee. If the card is close to max, it may be difficult to secure a new 0% introductory period on a new card and if you can, it might not be enough to cover what you have on the current card.

I personally financed a good bit of my IR on a CC and it has paid off, financially. I looked at the unsecured loan rates and compared it to my CC 0% introductory rate and a regular rate after and decided it was the way to go. I have since transferred the balance a few times to keep the 0% rate and only paid a 2-3% balance transfer fee so my true interest rate is higher than 0 but well below what was then the market rate. I am basically paid off two years later but, I am no longer flying because of the need to pay off the debt. Financial win, but a lose grand scheme.

So again, I would caution against it. It can be done but the odds are stacked in your favor. CC debt is brutal to your credit score. Maxing a card out can make it tricky to secure a new card for a transfer. The rates that I have seen now are equal to or higher than a standard unsecured loan. In addition, if you don't have a good paying job, the payments can make it difficult to continue to fly. Stringing out the payments long term will result in a higher overall interest rate once you factor in transfer fees and any interest paid on CC while you try and get a new card.

Another point to remember is the impact on your credit score. If you plan to pay it off in a year then it might work out, but if you have that kind of income, stop flying for a bit, save the cash and headache and then go back to paying as you go. If you can't pay it off in a year or two, and don't have a job that makes the debt load manageable it will make it very difficult to secure any new loans if one is needed. Forget about a good rate on a new car or if you want to buy a house. You will have a higher interest rates on those purchases which will all but eliminate the gain you see on having the unsecured debt on a CC.

So from someone who is finishing up what you are planning to do, I say find a different route if at all possible. Debt is to be avoided at all costs.
 

jskibo

Done
After your instrument you're going to need another 100+ for Commercial mins. Got anyone to split some time with to cut your rate to ~$50 and hour?

Personally I wouldn't put it on a card unless I had the cash in hand to pay it off and was just soaking a benefit (0%, Airmiles, Cashback, etc...), or I guess, had some pre-planned BK7 scheme in mind (not advocating that before someone assumes that).

rframe is right, at CFI pay, unless you're living at home or significant other is paying your expense, you'll have a large hole to dig yourself out of and likely be hating life while you do it.

Ultimately the choice is yours though. Good luck in your pursuit!
 

ryanmiels

Well-Known Member
Thanks for the responses. I agree credit cards can be dangerous and you have to know what you are doing. Let me be more specific, I am not planning on borrowing as much as you might think since I have some money on my account at my flight school and also some in savings.

I would probably put 5000 dollars on a 0%APR card for 1 year. I would put that on my card day 1. I would then start paying it off monthly, with the aim of a 0 balance at the end of 1 year and the 0% rate. That is 420$/mo. I can afford that with my current living expenses. No interest payments.

Is this too idealistic? I would say I am fiscally responsibly and wouldn't let things get out of control. No plans to transfer a balance after the intro rate is over.

And yes, I am trying very hard to find some flying buddies to split time with.
 

Douglas

Old School KSUX
There is nothing wrong with a "school" loan, the issue arises when people don't put pen to paper and do the math on what their monthly payments will be and if they will be able to afford it.
 

Matt13C

Well-Known Member
Thanks for the responses. I agree credit cards can be dangerous and you have to know what you are doing. Let me be more specific, I am not planning on borrowing as much as you might think since I have some money on my account at my flight school and also some in savings.

I would probably put 5000 dollars on a 0%APR card for 1 year. I would put that on my card day 1. I would then start paying it off monthly, with the aim of a 0 balance at the end of 1 year and the 0% rate. That is 420$/mo. I can afford that with my current living expenses. No interest payments.

Is this too idealistic? I would say I am fiscally responsibly and wouldn't let things get out of control. No plans to transfer a balance after the intro rate is over.

And yes, I am trying very hard to find some flying buddies to split time with.
Do what you think is best, but if you only need 5k I would stop flying and save it vs put it on a card.

I can't make the math work in my head though, how do you have just over 100 hours but only need 5000 to finish your ratings? Are you not paying the instructor, have a sub $100 rental fee and access to a very cheap complex aircraft? if you have 10k on credit at your school, you should be able to save up the 5k in the time it takes you to fly that off.
 

jskibo

Done
Those are incredible rates! I hate living in the NE, everything is so over priced.
Yeah it's a great club and only a few real active guys so availability is fantastic.

There's a C177 @$95 too if you want some shoulder room, though I haven't been check out on that yet.
 

ryanmiels

Well-Known Member
Do what you think is best, but if you only need 5k I would stop flying and save it vs put it on a card.

I can't make the math work in my head though, how do you have just over 100 hours but only need 5000 to finish your ratings? Are you not paying the instructor, have a sub $100 rental fee and access to a very cheap complex aircraft? if you have 10k on credit at your school, you should be able to save up the 5k in the time it takes you to fly that off.
The benefit I see of putting it on the card vs saving is I wouldn't have to stop flying. I'm not getting any younger.

5000 wouldn't be enough to finish up my ratings at all, just my instrument and then some time building. I have some in savings, but if I use it now then I'll just be revisiting this issue when that is all used up. I'm trying to use a variety of resources here I guess you could say.
 

ryanmiels

Well-Known Member
$5k to finish instrument? How far along are you on the instrument rating?
I have 15 hours simulated, need 25 more. I'll try to do as much as I can with safety pilot, but I am estimating 15 dual, 10 safety pilot? With my rates thats about 4500, and I might need 3-4 more hours XC. (Also I'm not sure if the safety pilots would be willing to split cost yet, working on it)

Actually, now that I think of it, I could do as much as possible of that 15 dual in a sim, would could save me a lot of money.
 
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