FAQ: What is a Chattel Mortgage & how do they work?
What is the definition of a Chattel Mortgage, and how do they work?
A Chattel Mortgage is a commercial car finance product.
Under a Chattel Mortgage a finance company lends money to the customer to purchase a car or other motor vehicle (the "chattel"), and the customer makes regular repayments.
The customer takes ownership of the vehicle at the time of purchase, but the finance company also takes out a "mortgage" over the vehicle by way of an ASIC-registered Fixed and Floating Charge to provide security for the loan.
Once the term of the loan is completed and any residual (balloon) value is paid, the finance company removes the Charge, giving the customer clear title to the car. Alternatively, the customer can "trade in" the vehicle or re-finance the residual value.