Aircraft Security Agreement

How Does an Aircraft Security Agreement Work?

Owning your own aircraft is an expression of luxury. As airplanes are some of the more expensive investments that one can make outside of owning a home, it is understandable that aviation is a cost-prohibitive hobby. With this in mind, even the very wealthy find themselves in a position where they must finance the purchase of an aircraft. This process is also followed by more modest individuals purchasing hobby aircraft, and it is done by obtaining a mortgage via an aircraft security agreement. If the word “mortgage” in this scenario evokes comparisons to buying a home, those analogies are somewhat apt, as this arrangement also involves a debtor and a grantor.

Whenever an airplane is purchased with financing in place from a bank or lender, the Federal Aviation Administration (FAA) should be notified. Because this technically shifts the security interests and ownership of an aircraft among multiple parties, this information is critical to the accuracy of the FAA’s records. By submitting your official security agreement to this federal agency, you are acting in accordance with the law.

What an Aircraft Security Agreement Does 

On a very basic level, a security agreement for an aircraft is a document that outlines some important facts. It should include the name and address of the borrower as well as that of the lender. It should also note the collateral that is used as a security interest in securing the debt, which is typically the engine or airframe itself. This form should also include some additional information about the aircraft, including its make, model, serial, and N-numbers. 

Once this form has been completed, it should be sent to the FAA’s offices in Oklahoma City, Oklahoma for processing. With this agreement in place, the grantor has protection in the event that the debtor cannot pay back their loan. In other words, if the borrower cannot make their payments, the bank or lender can leverage the engine or airframe to recoup their losses.

Processing an Aircraft Registration with the FAA

If you have managed to secure financing for an aircraft, this is also a smart time to get started on your Form AC 8050-1. This document is used to apply for registration with the FAA, which is mandatory for all aircraft in the United States. This document will prompt you for some information about your aircraft, as well as yourself. You will also need to provide a bill of sale, which indicates your proof of ownership of the aircraft in question. Once processed, you will need to renew your registration every three years. The FAA, for their part, will send you reminders about this six and two months out from your registration’s expiration date.

Aircraft Security Agreement

Completing These and Other Documents Online

If you need to process a security agreement, initial registration application, or registration renewal, we can help. At the National Aviation Center, we offer online forms for all of your FAA paperwork needs. We also utilize an SSL-encrypted web portal, so you can rest easy knowing that your personal information is transmitted securely. To learn more, contact us by email or phone today.