Chattel mortgage, often abbreviated as CM is the legal loan contract used across many countries for purchasing movable personal properties. The lender typically secures the loan with a mortgage carried out over the chattel. The borrower gets the chattel at the time of purchasing the property and the mortgage is cancelled once the loan is repaid. Chattel Mortgage is a great option for people who want to purchase new motor vehicle as it is considered to be the simplest way of buying a movable property like vehicles. Simply put, this is a kind of mortgage where the property bought forms the part of collateral security. The Finance company directly pays to the seller the cost of the vehicle. The business then acquires the good from the seller. For the business this type of sale is considered to be cash sales. Once the loan is repaid the owner retains the right over the property.
These mortgages are business arrangements which are designed to help the sole proprietors and large corporations too to get loans for acquisition of motor vehicles. One norm that is to be fulfilled to get this type of mortgage is that at least 50% of the usage of the vehicle must be for official purpose. The repayment is done on monthly basis. Many financing companies do not charge any early redemption charges or exit fees and hence this type of mortgage is very popular.
Businesses which are looking for renewing their existing vehicles or business cars or replacing their present vehicles can generally opt for Chattel Mortgage. Any sole proprietor can also avail this type of mortgage if he is looking forward to acquire some business car or any kind of vehicle which would mostly be used for business purpose. An applicant with good credit history can get this loan quite easily.
Advantages of Chattel Mortgage
This type of mortgage comes with variety of advantages. The advantages can be availed by them who choose to have a Chattel mortgage. Some of the advantages are:
- Just as the agreement between the borrower and the financer is completed the borrower gets the Vehicle’s ownership. There is no need to make any kind of repayment before a month expires. You can use the car just after the financer pays the seller the agreed amount.
- On request the financing company would allow you grace period for repayment of your loan and you can use the vehicle taken in your business during this period to generate some revenue.
- You would also be getting different tax benefit from the loan taken for the car, even if your car is used for earning revenue for your concern.
- Most of the time when applied for mortgage the company gives 100% financing, meaning that you need not have to pay anything for the vehicle while acquiring it.
- There are many financing Company which would arrange for the approval of the loan on the very first day you apply, thus helping you to start your business at the earliest.
Any business who has taken Chattel Mortgage can avail different Tax benefits like they can claim depreciation on the goods, ask for deduction as interest is paid for the loan and deduct the running costs from the profits. Hence, to acquire some asset it is always better to take loan from a good financing company and then repay back the loan gradually.