The chattel mortgage is a legal term that essentially means “personal possession” or some type of property.

Chattels include not only cars but also boats, machinery, and real estates such as houses or mobile homes. The chattel has significant monetary value and serves as ‘security’ for a lender.

The term mortgage comes next. This is the Lender filing a public lien or taking an interest in the chattel. This means that the chattel cannot simply be sold to another party because it is not in the borrower’s possession to sell. If necessary, the lender may reclaim the chattel from the borrower.

What Are Chattel Mortgages?

Chattel mortgage meaning associated with a legal term that essentially means “personal possession” or some type of property.  Let’s see first What is a chattel mortgage. Chattels include not only cars but also boats, machinery, and real estates such as houses or mobile homes. The chattel has significant monetary value and serves as ‘security’ for a lender.

So, essentially, a chattel mortgage is the bank giving you the possession and use of the chattel, but they retain rights to it for the duration of the loan. 

Loan Agreement With Chattel Mortgages

Chattel mortgage is essentially a loan made to the owner of the chattel while keeping the chattel as the underlying asset. In this case, the chattel can be any movable asset, such as a car or jewelry, that can be used as collateral for the loan.

Chattel mortgages typically have lower interest rates than real estate loans, and the payment structure is also more flexible. Both of these features make chattel mortgages appealing to small businesses and business owners.

The chattel is held by the bank until the entire loan is paid off because it is used as security for extending the loan. If the individual or company fails to repay the loan, they must pay the penalty by selling the chattel. 

Guide to First-Time Buyer MortgagesWhat Separates A Chattel Mortgage From Other Types Of Loans?

You can take help from a chattel mortgage calculator for counting the exact payable amount. Here are the chattel mortgage loan types.

A chattel mortgage differs in the following ways:

-They are typically used for commercial purchases; and
-These mortgage interest rates are significantly lower than those of consumer and personal loans; and
-The products can be quite flexible depending on your situation; and
-The interest and principal on finance repayments may be eligible for deduction.

You can apply for chattel mortgage car finance as an employee, sole trader, partnership, or company if the car is primarily used for business. A real estate agent or an electrician, for example, must have a car like a truck or a van in order to perform his/her duties. 

What Are The Advantages Of A Chattel Mortgage?

Before availing of the facility of a chattel mortgage, let’s have a look at the advantages of having this mortgage. 

-Repayments can be structured over a variety of terms ranging from 2 to 5 years.
-Interest rates are typically lower than any unsecured loans. And it can be a part of the fixed or variable rates.
-Because you own the financed asset outright, it appears on your balance sheet as an asset, while the finance appears as a liability.
-A balloon or residual payment setup at the end of the term. It also reduces your monthly payments.

Which Is Better: A Chattel Mortgage Or A Lease?

Getting confused about which one to select, the chattel mortgage or the leasing. Let’s have a look at the factors of chattel mortgage vs leasing.

Chattel MortgageLeasing
A chattel mortgage is a loan process where while buying a vehicle, you are using security against the loan.Leasing is a process where you have to help accurately identify the key assets for expanding the company.
The chattel mortgage is a commercial loan product which is working in the same way as fixed-rate mortgages.Finance leasing is a commercial loan product that works in the same ways as fixed-rate traditional mortgages.
For the chattel mortgage, the lender can use your car as the security against the loan amount.The business will pay the monthly installment along with the rental payments for the matter of the lease.
A chatter mortgage is a short-term loan agreement. But the lease is a long-term agreement.By the end of the lease period, you will get two options. One is the payout for the residual value. Other than this, return the value of the vehicle or return the assets.


As can be seen, a chattel mortgage could be a good financing option for borrowers looking to purchase heavy business equipment or even a manufactured home. However, these mortgages have advantages and disadvantages that borrowers must weigh in order to find the best financing options.


Sumona is the publisher for Finance Team. In terms of professional commitments, she carries out publishing sentient blogs by maintaining top to toe on-page SEO aspects. Follow more of her contributions at SmartBusinessDaily and FollowtheFashion

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