Chattel Mortgage on the Rise: Should You Go for It?

With more and more individuals and businesses opting for chattel mortgages, you’re probably asking the question right now of whether you should also go for it or not. Before you make a move, though, you need to understand first how chattel mortgages work and whether you will actually benefit from taking one or not.

What Is a Chattel Mortgage?

According to Investopedia, a chattel mortgage or a CM is a legal term that describes a loan arrangement wherein the property used as security for the loan is a moveable one. In a traditional mortgage, the loan is secured by a lien on real estate. In a chattel mortgage, the security used usually comes in the form of a vehicle such as an airplane, a boat, or in the case of many individuals or business owners today, a car.

How Does It Work?

A chattel mortgage works the opposite way that a traditional mortgage does, at least in terms of legal relationship. In a conventional mortgage, the lender is the one who takes possession of the property serving as security. In a chattel mortgage, the lender does not hold any right on the “chattel” or the moveable property. Instead, the lender has the ownership of the property transferred to him until the loan is satisfied. At this point, the borrower takes full ownership of the chattel once again.

Will I Benefit From It?

One of the reasons that chattel mortgages are on a rise these days is that they can be tailored to the individual’s needs. If your business is looking for a term of 1 to 5 years, for instance, it can be readily made available for you. The same is true if you’re looking for longer terms, depending on the negotiation made between you and the lender.

A chattel mortgage works perfectly well over a car loan. More and more companies that need to purchase vehicles for operation consider the optimal solution, because unlike traditional car loans, the expenses can be offset against their business. And because a CM is considered as a business transaction, it will allow you to claim vehicle deprecation, interest costs, Goods and Services Tax (GST), and tax credits.

Should I Go For It?

The answer to this question depends on your needs. If you need a vehicle for your business operations and are looking for lower repayment costs, fixed monthly payments, fixed interest rate, and tax benefits among others, then a chattel mortgage is right for you.

One thin you need to keep in mind, though, is that chattel mortgages are not regulated under the NCCPA or National Credit Consumer Protection Act, which means both you, the borrower, and the lender, may be at risk since credit checks undertaken by licensed credit providers are not applicable. This is where the importance of choosing the right leasing company comes in. Before taking a chattel mortgage, always make sure you’re dealing with a reputable and transparent provider.

Overall, a chattel mortgage boasts of a number of benefits, especially for business owners. Compared to traditional mortgages or car loans, it offers lower overhead costs while providing good business operating expense. If you’re in the market to purchase a car or any vehicle for your business, start inquiring about chattel mortgage today and find out how it could work for you!

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