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A chattel mortgage is a kind of financing agreement for ventures. In simple words, it is a type of equipment or vehicle loan that lets business entrepreneurs use regular repayments for buying a product. One must remember that these mortgages are not categorised as an unsecured loans. It is also to be noted that the lender utilises the chattel as security for the mortgage just like a typical mortgage system, i.e., they have a stake in the property throughout the loan repayment period. Once you have made all the payments, the full ownership of the property gets transferred to you.

These mortgages are perfect for ventures that don’t want to pay an outright amount to finance an asset. This attribute lets business owners spend money on top-of-the-shelf expensive equipment without thinking twice and are also known as “personal property security” and “movable hypothecation”.

Benefits of Chattel Mortgage

• Flexible funding system customised to your requirements
• No need for asset value to be similar to the chattel loan size
• Lower interest rates as its secure funding
• Facility to request payment breaks
• Facility to draw down funds in lumpsum or instalments
• Tax deductions are available when products are utilised for business
• Could use any income generated by assets to repay the loan
• Better cashflow for business instead of own capital investment

Chattel Mortgage Working Process

• It is a straightforward process and resembles applying for any other secured loan.
• The process includes signing the contract and taking the loan, which means the borrower commits to pay in monthly instalments.
• Full property ownership gets transferred to the borrower once all the money plus interest is paid.
• One can choose between fixed and variable-rate chattel loans.
• Under a fixed-rate loan, you have to pay a similar amount till the end of payment due to the calculation of a fixed interest rate.
• Under the variable loan, market forces decide the interest on the mortgage.