Chattel Mortgage
A chattel mortgage is a type of loan agreement where personal property is used as collateral to secure a loan. Unlike real estate mortgages, which involve immovable property such as land or buildings, a chattel mortgage pertains to movable assets, often referred to as "chattels." These can include vehicles, equipment, machinery, furniture, and other tangible items.
In a chattel mortgage, the borrower retains possession of the chattel but grants the lender a security interest in the item until the loan is repaid. This means that if the borrower defaults on the loan, the lender has the right to repossess the chattel to satisfy the debt.
For example, if a business takes out a loan to purchase a delivery truck, the truck serves as collateral. The lender will register this security interest, allowing them to reclaim the truck if the business fails to make the required loan payments.
Chattel mortgages are commonly used in commercial financing but can also apply to personal loans. They offer a way for borrowers to access funds while leveraging their movable property as security, often allowing for potentially lower interest rates compared to unsecured loans.
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