Chattel Mortgage Image

Chattel Mortgage

Last updated 01 Mar 2019
A chattel mortgage is a form of equipment loan where the bank or lender provide the funds to purchase a vehicle, asset or piece of equipment and then accept that item as collateral for the loan. The hirer takes immediate ownership of the asset and retains ownership after the end of the payment period. Payment instalments are a combined interest and principal.
Key Features
Loan Size
$5k to $2m
Loan Term
1 to 5 years
Interest rate
5% - 15%
Approval Speed
Fast / Medium
Common Uses of Chattel Mortgages
This form of finance allows you immediate ownership of the item without the corresponding upfront cash outlay.
This form of loan can often be executed quickly and with minimal paperwork.
As you, the hirer, takes ownership immediately, you are able to claim the depreciation of the asset.
Keep in Mind
Should you default on your debt, the bank may repossess your asset or piece of equipment.
While lower cost than unsecured loans, chattel mortgages are more expensive than business loans secured by for instance property.
There may also be fees involved from setting up the mortgage to early termination fees that add to the cost of the loan.
Who Qualifies for a Chattel Mortgage?
As is the case for all equipment loans and leases, the fact that a chattel mortgage gives the lender collateral in terms of the asset leased means that the lenders may take a slightly more flexible approach to your credit score and operating history.
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