What is a Chattel Mortgage?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 16 October 2019
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Chattel mortgages are loan arrangements that involve the use of movable personal property as the security for the loan, rather than the more common approach of using the actual real estate to secure it. In choosing to use movable property, the borrower allows the lender to exercise a lien against the asset or assets that will remain in effect for the duration of the loan. Once the mortgage is repaid in full, the borrower reassumes full control of the chattel.

A key factor in the structure for a chattel mortgage is that the assets held as security cannot be permanently tied to any land holdings owned by the borrower. This means that such assets as buildings, or even land that does not currently support any type of building structure, cannot be used as the collateral or chattel for the financial arrangement. All assets that are used as security must be considered movable or non permanent in nature.


Loans created using this model are very common in the business world. Corporations may choose to use this type of loan as a means of purchasing new properties, while using assets such as operational equipment, vehicles that are owned in full by the company, or other tangible items that are not permanently attached to land. This allows the corporation to work with the acquired fixed property as it sees fit, since the property does not have any type of lien imposed on the asset.

Part of the advantage to the lender is that the movable property used as security on a chattel mortgage can be seized and sold with relative ease. This can often speed up the process of settling the debt in the event of a default by the borrower, as well as allowing the lender to quickly recover from the failure of the business deal and not incur a great deal of further expense related to recovery efforts. Often, movable property will realize enough return to cover the outstanding indebtedness, including both the balance remaining on the mortgage and any fees and charges incurred during the foreclosure process.


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Post 5

Indeed, chattel mortgages can be taken by individuals as well as incorporated bodies! If registered they create a legal charge, therefore the creditor can proceed to auction off properties charged without court order. Only a notice is required. But however, if not registered then a court order is a condition precedent for attachment and execution of mortgagor's properties by the lender!

Post 4

With respect, you are not answering my question. I am fully aware that chattel mortgages usually taken out by businesses, but believe they are only incorporated businesses. If any experience of a sole trader or partnership business securing funding by this method please tell me, as a funder, how this can be achieved and in particular, how a mortgage can be registered.

Post 3

@Crisptety: I want to disagree a little bit with the notion that chattel mortgage interest rates are lower because they are secured by business assets. In fact, the best interest rate for a chattel mortgage is about 7.5 percent.

I think that if you have a small business you might want to look at a home equity line of credit on your home which would offer half of that rate. Many of these equity lines start at 3.5 percent with excellent credit.

Of course, the downside is that you are putting a lien against your home, but if this is a loan that you can pay back quickly it might be worth it to you. There are many sites that

will offer a loan calculator in order for you to see the estimated payments before you apply.

The mortgage calculators can also offer payoff date information to really get you motivated to pay off that loan. I think that that is what I would do instead of getting a chattel mortgage.

Post 2

My understanding is that a chattel mortgage by definition is taken out by a business or business entity. It is understandable to use a chattel mortgage because businesses usually have a lot of assets outside of their real estate holdings and to tap into this instead of just asking for a regular loan would probably offer the business a lower interest rate because this type of loan is secured and less risky for the bank.

Post 1

Is it possible to grant a Chattel Mortgage to an individual or partnership that is enforceable? If so how do you achieve registration?

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