Line of credit for flight training?

[dave1452]

Hi everyone, this is my first post. I figured I would join this site and try to get a better idea of what I'm going to do with some guidance and opinions from all of you, it would be much appreciated. My name is Dave, and I just turned 20. For the past year and a half I have been working an oil and gas related job living in a work camp for two weeks at a time running equipment for a gas plant construction job. It's been a good job pay wise, ($32 dollars an hour for 12 hour days) but it's really not what I want to do.

My whole life has revolved around airplanes. I want to be in the sky. I continually try and talk to my co workers about them, explain the helicopters that land everyday on site and have read from the ground up over a dozen times on my lunch breaks, haha. Now, some of you may already be thinking "Well if it's really your dream why haven't you taken your riches from a 32 dollar an hour job, saved and pursued it?" It's harder then it sounds. Being young and dumb, I have done other things with the money than fly, but I've had a lot of fun too. I'm getting to the point of realizing I don't want to be running loader or zoomboom for the rest of my life and want to live my dream, starting in May by getting my truck paid off and with the project coming to a close, leave with what I have saved and going to work for an airline in Whitehorse.

My real question is, would you recommend getting a line of credit for flight training? Like I mean going into CIBC and getting a 75,000 dollar personal line of credit and using it up on taking a year off getting my PPL, CPL, IFR and Multi, then making interest only payments for a *really* long time afterwards? I have an alright credit rating (850) with my truck loan and credit cards (which I keep paid up) which might help me get the PLC before I quit my current job, but I'm still not sure, I'm not a big financial person, and I don't really have collateral. Like I said, I suddenly came to a realization driving home one night last month, a bigger "epiphany" than I've ever had before, but that's another story. I'm realizing I'm willing to sell all the toys I've bought over the job, drop everything and just go and get what I want done and start on the bottom all over again doing what I love. I love the idea of working as a ramp rat and sticking with one company to get to the top, flying eventually because it's what I want to do.

Thank you everyone who has read my long winded story and sorry for the excess rambling. What do you all think?

[Beefitarian]

You're going to borrow seventy five thousand dollars? How are you going to pay it back?

I'm old and stupid but figure you should keep your job. Train as much as you can but stay out of debt. Then you can afford to get a job flying once you finish the ratings.

But I suppose borrowing money getting a license then trying to get your job back to pay off the loan is another option.

Sorry I can't say, "Wow, great idea!" like you were hoping.

[gaamin]

Edit

[iflyforpie]

Sounds like a bad idea. I make more than that and $75,000 on a line of credit gives me the heebee jeebees just thinking about it.... never mind trying to service it on a minimum wage entry level job.

Interest only is for student loans only I believe.... otherwise it is usually 3% of the outstanding amount which is $2250 a month.

[azimuthaviation]

Toronto Dominion bank used to have student line of credit for aspiring pilots at one time and would lend up to I believe $40, 000. They stopped doing that about a year before the big credit crash of 2008. I can't say for sure but it seems to me if it was a good program and the bank was getting its money back it would still be around. I guess the bank found it hard to recoup its defaulted loans by trying to repossess a pilot license and IFR rating. But that is just speculation on my part.

[dave1452]

Thanks for the replies guys, it gave me some insight on this matter at hand, and thank you for not bashing me. One thing I forgot to mention that might make a difference, but would require me to wait a few years. When I turn 25, my band is giving me a sum of money, that will be far greater than the loan I want. So do you think that I should wait and get the money, or wait a year or two, save and take a loan, then do my training and start to progress and pay the loan back with the money I get? I don't know if 5 years could make a difference or not in making this a career or not.

[cgzro]

My two cents.

- keep the 32/hr job and fly weekends.
so what if it takes an extra year or two or 5.

- dont count on future money to plan debt.
Shit happens but the debt stays. Unless the money is in a bank with your name on it you have no real guarantee.

If it were me that future money would buy me a nice little plane to build time , pay for gas and use to go job hunting. Nice little RV8 or other tail dragger. Plus while working a ramp youll have something to fly!

just my two cents..

[JungianJugular]

My God, you're still super young man. The things I would do at your age with those earnings. You make amazing wages. Keep your job, save some cash for flight training (at least 3/4 of what you expect to pay). There are heaps of people who would love to make $32/hr. You'll thank yourself after flight training when you're not in debt. You made some shitty financial decisions, I did too when I was younger. But we learn from our mistakes.

Never put money on account with a flight school. Pay as you go. Avoid flight training debt as much as you can, if you have to take a loan, try to keep it as low as possible by saving more $$ for training. Most importantly, make sacrifices and live the frugal lifestyle.

[Colonel Sanders]

Debt is like voluntary slavery. Or at least indentured servitude.
Don't go there.

The trick is to avoid big financial obligations. You buy a house,
a car, a motorcycle etc all on credit you owe $$$ every month.

If you want to fly, stay single, own a car that's paid for and
accumulate $$$ in the bank.

[Shiny Side Up]

The trick is to avoid big financial obligations. You buy a house,
a car, a motorcycle etc all on credit you owe $$$ every month.

I can only assume that you've then started from a life of reasonable weath to hold this opinion. I would say a house and a car are the only two things to "indenture" yourself over if need be since they are going to provide a return on investment for you. Possibly an education, depending on what you're plan is. I wouldn't go into debt to get a pilot's license, but if I was starting out again, I would go into debt if necessary to say get my plumber's ticket or welding ticket. Don't buy toys on credit. Remember if you're renting, you're throwing money away. If you're paying on something you get to keep, you're going to get something back out of it.

If you want to fly, stay single, own a car that's paid for and
accumulate $$$ in the bank.

In truth, that only works if a) you live with Mom and Dad until you accumulate enough money, maybe your parents were lax enough to let you hang out inot your 30s, most won't be. b) owning a cheap car cheaply depends on your ability to fix it. If you have no mechanical ability, get as new and reliable of a car as you can afford. That might mean a bit of debt, but paying someone else for car repairs also might mean that, with the added risk of you losing work should your car fail you. Staying single for survival is a tough call. The way rents are going these days and starting wages means you're probably going to have to figure out some sort of living arrangement that depends on other people, which in my experience is really hit and miss. Currently for me financially its working out well, together we can afford stuff (without debt) that singly I'd never dream of. Occasionally though that means I spend money on stuff I don't want to, but so far its a plus.

[altiplano]

2 weeks in 2 weeks out? @$32 an hour? You've got a perfect spot to work hard and then fly hard to get your training done while you keep bringing in the cash, don't finance it.

I do suggest you do get a low interest line of credit now though while you have a decent paying job and the bank will give it to you. Don't tell them you plan on taking flying lessons or quitting your job down the road or they will want nothing to do with you. Then sit on it, don't use it. Save it for the day you may find yourself in your low pay entry level pilot job and your truck breaks down... or to finance your start up in the city when the airline gig you've been applying for calls. Keep it as a rainy day bail out fund for the day you really need it.

[Trematode]

Start with your PPL.

If you can save up enough money for that, by all means. But if for some reason you can't with your current job, I don't see the harm in getting a student line for about 10k to do that.

Once you've gotten past that hurdle -- it shouldn't be very difficult if it's what you really love -- then you can explore your options further for the rest of it. I'd recommend looking into canada/provincial student loans, as you could qualify for some pretty good grants/bursaries that you might not have to pay back. They've got a great repayment assistance program where you might not have to pay any interest at all while you toil away with your first flying job.

It may sound exaggerated, but my experience when I was instructing is that very few people have the wherewithal to go all the way and actually get their licenses: For every 100 students enrolled in groundschool, maybe 25 would actually get their PPL. Out of those, maybe only 10 their CPL, and fewer still onto multi-ifr and/or instructing.

Primary reasons for people not finishing by far always seemed to be:

-Time Required
-Effort Required
-Money Required

I've seen plenty of people willing to invest the first two have their progress come to a screeching halt when they run out of the third. If you really want to do it, I'd say bite the bullet, and do what you have to do to have the money available, and go hard full time. Start with the PPL though, and see how that goes.

[5400AirportRdSouth]

I agree with Altiplano, with the provision that, if after your PPL, your priorities are still the same, then incurring some debt to finish in a timely / efficient fashion wouldn't be out of line in my opinion.

My own experience, the debt I carried at the end of my CPL became one of the single largest limiting factors in my mobility and ability to go where the work was. The less debt you are carrying, the more options open up as far as moving to area where there is lots of work, but the pay is low and the cost of living high(ish).

I'm still chipping away at my own Line of Credit. Some months its interest only....

Also, maybe I'm out of touch with the current cost of flight training, but 75K seems pretty high. 4-5 years ago, it seemed like 35-50 would be sufficient. Standing by to be corrected....

Oh, and I've also fantasized about what my bank account might look like if I moved to Ontario a year before starting my flight training ( to establish residency ) and taking advantage of one of the college programs out there. I've heard various stories indicating that Zero to MIFR Hero can cost as low as 10K, being tuition only, with the government picking up the flying costs end of things.

[Beefitarian]

If you had a job offer contingent on getting a rating it might be worth borrowing very little money to finish it.
I bet it would not be fun to owe a bunch of money and be having a tough time making enough money for rent and groceries.

I would say a house and a car are the only two things to "indenture" yourself over if need be since they are going to provide a return on investment for you.

I agree those are the two things that might be worth getting into debt to purchase. The car much less so.

I guess I get a return on having bought a house in that theoretically I won't have to pay rent after the mortgage is paid for. Funny thing is by the time you get to the end of a mortgage if you can, the payments don't seem so expensive. If you think you own a house in North America try not paying your property taxes. Maybe you own the house but you're leasing the land forever. Sure I could sell the place for more than I bought it for. Then I have to find a place to take this laptop to keep it away from the snow and wind.

I sure didn't enjoy getting to the end of any vehichle loans when I had paid for the thing plus interest and then get to the part where it's not worth half of the price I paid. I had to sell one once and just made enough to get out of the loan, the down payment and monthly payments ended up being like renting it. Giving the bank extra dollars so I didn't have to save up for something sucked if you ask me. Also having a loan on years 5-7 when I would have to take a loss to sell the thing and not even have it if I did.

Anyways I digress, even though it would be the best idea ever, hardly anyone want's to actualy get a loan to buy a stupid house in their 20s and OP's about to pay off his new truck, if he needs new one already that's another issue I suppose.

[tired of the ground]

By "band", I assume you mean Indian band, not some rock band that is going to hit it big when you turn 25.

There are a TON of scholarships, bursaries and free money for first nations that wish to pursue post secondary education. I was told by a recipient of these monies that they will give a full scholarship to pretty much anyone who wants it (anecdotal evidence only, take it for what you paid for it).

Start here. http://www.aadnc-aandc.gc.ca/eng/110010 ... 33683#fina

Being first nations could help you looking for a first job at an end of the road type of operation. I can't remember the place (wasaya maybe?) that specifically advertises that they want first nations pilots.

If you're footing the bill, hang on for a few years and save the money. It will be near impossible to pay off a 75k loan on a minimum (or less) wage job.

If ottawa is paying, sign the forms, part the red tape and work your ass off at school. You'll be debt free flying and have a good sum of money in the bank when you turn 25.

[kevinsky18]

You are working 2 weeks in 2 weeks out? There is absolutely no reason to quit your current job. Do your training on your two weeks out and pay for it with your good solid wage.

You will not make enough money in the first 3-5 years as pilot to even cover the interest payments on $75,000 let alone rent and food. So forget about it.

Further at 20 years of age, regardless of credit rating, I'd be amazed if any bank would give you a $75,000 unsecured line of credit so this isn't even worth debating.

[Colonel Sanders]

OP said:

I just turned 20

poster above said

pay for it with your good solid wage

I know everyone is in a tremendous hurry, but I would prefer
to be qualified and debt-free with money in the bank at age 24,
instead of qualified and horribly in hock at 22.

Old-fashioned, I know. Maybe even elitist. I'm not sure what
I am, any more.

[cap41]

I find in general. The problem with debt is. If you have 5k, or 50K and you manage the payment. It seems that adding to that debt is no big deal. You think if i can mange 50k i can manage 60k etc. All of sudden your priority changes from trying to pay debt off, to living with debt and managing it.

[Shiny Side Up]

I know everyone is in a tremendous hurry, but I would prefer
to be qualified and debt-free with money in the bank at age 24,
instead of qualified and horribly in hock at 22.

That's not the choice most have though. The choice in most cases is to be qualified for nothing and remain debt free, or get qualified for something and be in debt.

Old-fashioned, I know. Maybe even elitist. I'm not sure what
I am, any more.

Merely out of touch. You're not young, you're not starting out, and maybe you've forgotten what its like to be in that position. You have no experience, you have no qualifications. I have young guys working for me all the time and its tough out there to get started - I feel bad for them because I don't know how anyone starting out can make a go of it without some hefty assistance from Mom and Dad and a lot of luck. People are in a hurry since the only thing you are limited on in this life is time, so if you aren't busy when you're young its going to slip away on you, or you'll be that old guy operating a goonspoon before you know it with no options. The only thing worse than being young and qualified for nothing is being old and qualified for nothing. I might not know much about flying airplanes, but I do know a lot about working for a living, and you'll run out of time before you get enough money to get ahead. Trust me, I used to work his job, and thought the same thing, though I didn't have a truck loan at the time to worry about since I have the ability to keep junkers running for cheap. In his case he should work at least until he has that thing paid off because whatever he decides to do, you need a reliable vehicle to live and work in most of this country. Hopefully he isn't unwisely paying for some monster he doesn't need.

I agree those are the two things that might be worth getting into debt to purchase. The car much less so.

All really depends. Vehicles are money pits if you don't know how to take care of them. If you can fix your own vehicles its a big money saver in your life, I figure so far I've probably saved a lot of money this life by doing things myself and knowing enough about them not to throw my money away. If you don't know how to change your own oil, it would be wise to have something newer and as reliable as you can get. You lose a day of work, or worse, your job, because your transportation let you down it will have cost you a lot more.

I find in general. The problem with debt is. If you have 5k, or 50K and you manage the payment. It seems that adding to that debt is no big deal. You think if i can mange 50k i can manage 60k etc. All of sudden your priority changes from trying to pay debt off, to living with debt and managing it.

The secret is not to get into that trap. Not hard when you think about it, the problem is people confuse what they need with what they want. You might need to go into debt to get a truck that will help your work, you don't go into more debt so you can have a heated seat and the chrome package.

I know dealers hate when someone like me comes through the door, I buy bare bones vehicles and the only option I want is a full sized spare.

[Colonel Sanders]

I didn't have a truck loan at the time to worry about since I have the ability to keep junkers running for cheap

A 250hr CPL ought to drive a paid-off 10 year old car
with at least 200,000 km on it. The trick is to find a
reliable one without too much rust.

Debt is evil, man. The people hawking those payday
loans (titles & tags) ought to go to jail, IMHO.

This 20 yr old is earning $32/hr, 2 weeks on, 2 weeks
off. Assuming the price of a barrel of oil doesn't tank -
Alberta produces it very, very expensively - he ought
to be able to self-finance, while standing under the money
tree.

Keep standing under the money tree.

dealers hate when someone like me

Don't buy new. Don't take your vehicle to a dealer
for service. Ever. Don't ever finance a vehicle. Pay
cash for it - for what you can really afford to drive.

Going into debt for something which depreciates is
pretty much the definition of "bad debt". This is entirely
different from borrowing money to finance a commercial
operation which has a double digit internal rate of return.

http://en.wikipedia.org/wiki/Internal_rate_of_return

I define "bad debt" as borrowing money for toys. Stuff
that depreciates. Essentially you are mortgaging your future
to get pretty toys now, which horrifies me. Anyone contemplating
that needs a role model.

"Good debt" is borrowing the minimum amount of money
possible for the minimum interest rate for working capital
so that you can make a pile of dough and be in a position
to pay off the debt ASAP.

[Colonel Sanders]

I have young guys working for me all the time and its tough out there to get started - I feel bad for them because I don't know how anyone starting out can make a go of it without some hefty assistance from Mom and Dad

I agree that kids need help from their parents, but probably
not the kind you are thinking of ($$$).

What kids need from their parents:

1) install a work ethic. Learn to work, and work hard.

2) teach them to ask questions (and think) about what
is going on around them. Work smart.

3) instill a powerful sense of honour and integrity. I will
take character over genius, any day of the week.

Remarkably few parents have any interest in teaching
their children any of the above - they all seem antiquated
and irrelevant in these days of easy loans and gangster music.

SSU: how many kids do you have? I have four. The oldest
is in engineering at university and I have never paid a dime
for his tuition, housing or books. A combination of scholarships
and hard work made him financially self-sufficient as a student.

I am sure you would shudder at how I instill #1, #2 and #3,
but it works.

[Shiny Side Up]

A 250hr CPL ought to drive a paid-off 10 year old car
with at least 200,000 km on it. The trick is to find a
reliable one without too much rust.

Actually that's the mileage when stuff starts to go wrong with them. A vehicle with that sort of km ain't "reliable" no more. Anticipate some expensive fixes in the near future, especially if you don't know what to watch out for.

Debt is evil, man. The people hawking those payday
loans (titles & tags) ought to go to jail, IMHO.

I won't disagree there, but that's not the sort of debt we're talking about. If one is working around that sort of short term loan shark problem, well then you're troubles are pretty bad.

This 20 yr old is earning $32/hr, 2 weeks on, 2 weeks
off. Assuming the price of a barrel of oil doesn't tank -
Alberta produces it very, very expensively - he ought
to be able to self-finance, while standing under the money
tree.

Keep standing under the money tree.

The problem is, it isn't a money tree, that's what they want you to think. The job is go nowhere. Something to think about, when I used to do that basically same job it paid around $25/hr, good for over ten years ago. Living in camp seems like a good deal. When I did that though, the price of gas was only 36 cents a litre, so theoretically I was banking more, and we also did stuff they don't allow any more like having no days off until work was done. Longest stint was I think 68 days of work in a row. Somewhat inhuman, but that was then. Now I should say I lived a pretty Spartan lifestyle, it was pretty much all work after all, but at the end of it, it just wasn't enough. Not to get an education with anyhow. Maybe if I did that for another dozen years. You just don't get ahead. The problem is the work eats all your time. You have to continuously work to keep the money flowing, but you're capped out. What you do figure out though is that there are guys on the jobsite who are making your wage look like peanuts and they are ahead, and not much older than you in some cases.

Don't buy new.

I used to think that too, until started looking at prices. Depends sometimes on what's out there in the used vehicle market. I bought my last vehicle new, and it was a better deal than most of the used ones out there. $1000 bucks extra was the only difference to have zero km instead of 200,000. Buying used is somewhat of a risk if you don't know about cars and trucks. It won't be a deal when you have to fix something. Warranties are good to have as well.

Don't take your vehicle to a dealer

Sound advice unless its specifically for warranty work.

Don't ever finance a vehicle. Pay
cash for it.

Depends again on what sort of deal you can get. 0% down and 0% interest are pretty good if you can get them and you can pay it out when you want it. That way the money is in your account rather than someone else's. Also depends on your circumstances.

for what you can really afford to drive.

This is really the key, for however you go about it, and the biggest most common mistake people make. Don't buy some gas guzzler if you don't need it.

SSU: how many kids do you have? I have four. The oldest
is in engineering at university and I have never paid a dime
for his tuition, housing or books.

None, but my parents never paid a dime for mine either. That's not to say they never helped though. I'm not a self made automotive whiz after all, and I suspect you've aided (or their mothers have) in some fashion as well. What I know about how to manage debt successfully also comes from Dad, or I would have probably been eaten alive by the bank too. Lots of people I know aren't so fortunate to have even that sort of support though.

I am sure you would shudder at how I instill #1, #2 and #3,
but it works.

Since I learned those largely with the assistance of my father's boot, I suspect that you have a kinder and more gentler new wave approach.

[Colonel Sanders]

A vehicle with that sort of km ain't "reliable" no more

Not sure I agree with that. This is a recent photo of
a very reliable, quiet car with AC that gets 38 US mpg
on the tank:

What I know about how to manage debt successfully also comes from Dad

That's more important than any money he ever gave you.
You can either give a guy fish, or give him a fishing pole
and teach him to fish. Most people prefer the former, but
I prefer the latter.

it isn't a money tree ... The job is go nowhere

Of course a camp job goes nowhere. It's like being a lifeguard -
ok at 20, weird at 40. But while he is 20, he can use it to finance
the training he wants, for the job he wants in 5 yrs.

It certainly is a money tree! Until the price of oil drops, anyways.

[Colonel Sanders]

On the subject of buying a (new) car:

0% down and 0% interest are pretty good

That's just financial sleight-of-hand. Those terms mean that
the car is substantially overpriced - a common problem in
Canada. Buy a used car in the USA, btw.

Anyways, one could purchase a $30k car for 0/0 or the
same car for $20k at market rate interest with the same
payments. That's a shell game, which is for rubes and tourists.

Reminds me of when the wife goes to the mall and comes
back and tells me about all the money she's saved because
everything she bought was on sale

[ScudRunner]

I believe that you can only take credit for interest on student loans not student lines of credits when it comes to Taxes.