CandleFocus Glossary Editor
A Chattel Mortgage is a loan agreement between a lender and borrower, which typically uses a specific piece of movable property, known as a chattel, as security for the loan. A chattel mortgage is normally used to finance the purchase of an item of equipment and is commonly used by companies who do not have access to conventional forms of finance. Depending on the lender, the repayment terms of a chattel mortgage can either be fixed or variable.
The piece of equipment being purchased is the security for the loan, and a transfer of ownership to the lender is executed until all loan commitments have been met. A chattel mortgage is different to a traditional loan or mortgage because, while the borrower still retains full title of the equipment, the legal ownership of the chattel remains with the lender. This is in comparison to a traditional loan or mortgage where the ownership of the asset remains with the borrower until the loan is paid in full.
Chattel mortgages are particularly popular for companies when purchasing items such as motor vehicles and heavy machinery as the loans are often more expensive and require a much lower deposit than a traditional loan. Low-interest, government-backed loans are available to some borrowers, but the rates on these types of loans are still often much higher than those of a traditional loan.
Due to their secured nature, chattel mortgages are ideal for businesses and individuals who might not have a perfect financial track record. The interest rate for a chattel mortgage is usually lower than that charged for an unsecured loan, although some lenders will offer lower rates to customers with a good credit rating. As with any loan, it’s important to compare different lenders and their offers before settling on a chattel loan.
Chattel mortgages provide a great option for businesses to secure the funding they need in order to purchase necessary items of equipment. They are often more expensive than traditional loans, but with the right lender, can provide more flexibility and options in terms of payback terms.
The piece of equipment being purchased is the security for the loan, and a transfer of ownership to the lender is executed until all loan commitments have been met. A chattel mortgage is different to a traditional loan or mortgage because, while the borrower still retains full title of the equipment, the legal ownership of the chattel remains with the lender. This is in comparison to a traditional loan or mortgage where the ownership of the asset remains with the borrower until the loan is paid in full.
Chattel mortgages are particularly popular for companies when purchasing items such as motor vehicles and heavy machinery as the loans are often more expensive and require a much lower deposit than a traditional loan. Low-interest, government-backed loans are available to some borrowers, but the rates on these types of loans are still often much higher than those of a traditional loan.
Due to their secured nature, chattel mortgages are ideal for businesses and individuals who might not have a perfect financial track record. The interest rate for a chattel mortgage is usually lower than that charged for an unsecured loan, although some lenders will offer lower rates to customers with a good credit rating. As with any loan, it’s important to compare different lenders and their offers before settling on a chattel loan.
Chattel mortgages provide a great option for businesses to secure the funding they need in order to purchase necessary items of equipment. They are often more expensive than traditional loans, but with the right lender, can provide more flexibility and options in terms of payback terms.