What is a Chattel Mortgage?
A ‘chattel’ an item of property other than freehold land (and structures on property), including tangible goods, so a chattel mortgage is similar to a standard mortgage in that the loan is secured by the property being financed.
This type of loan can be useful to any individual or organization that will be using the vehicle(s) for work at least 50% of the time.
How Chattel Mortgages Work
When you take a chattel mortgage the asset becomes yours, and the financier will register their interest with the PPSR (or Personal Property Securities Register) until your loan is paid in full. After the last loan repayment, the registration against your vehicle or asset is removed.Chattel Mortgage Flexibility
The flexibility of a chattel mortgage leaves the borrower with many options for setting up repayment schedules. As this type of loan is not as regulated as other car loans, the repayment options can be tailored to fit the needs of the purchaser.
The purchaser can make a deposit, lowering the amount borrowed and allowing for extra tax benefits in the purchase of the vehicle, or they can finance up to 100% of the purchase through the chattel mortgage. Larger payments can also be made throughout the repayment period. A final balance payment can also be set to reduce monthly payments. This can be set up to 60% of the loan amount.
If the individual or organization is registered for GST on a cash accounting basis, there are options to claim Input Tax Credits. GST will not be paid on any monthly repayments or on a final payment but would be paid on a deposit. There is also the possibility of tax deductions on interest rates and depreciation value.
Keep in mind that as chattel mortgages are less regulated than other car loans, you need to make yourself aware of all the terms and conditions involved before signing up. While this flexible regulation is useful to you as the borrower, it also requires you to be more aware of the terms involved and make sure you deal with a trusted financier.
How Chattel Mortgages Work
Interest rates for car and equipment loans are generally slightly higher than published property finance rates, but this will vary depending on the terms of a chattel mortgage, product, financier, and so on.
Variables that will affect the associated fees include the amount of the loan, the repayment schedule, the amount of the deposit, and the amount of monthly payments.
Chattel mortgages are usually supplied with a fixed repayment schedule for the life of the loan, though you may make balloon payments to lower these obligations.
As the loan is secured, the interest rates will decrease. For more in depth information about interest rates and fees you will need to contact your financier.
Qualifying Criteria
Chattel mortgages are easily utilised by any business that is purchasing vehicles or equipment. This includes sole proprietors, trusts, partnerships, companies, or anyone holding an ABN.
Since a chattel mortgage is less regulated, and the vehicle is used as collateral, the chattel mortgage is often a consideration for those with poor credit.
To qualify you will need to have an ABN and driver’s license.
How to Apply for a Chateel Mortgage
The application can be completed in person or online. To avoid delays in your application processing, make sure you have all the necessary documentation on hand. This includes:
- ABN
- Driver’s License number
- Account number and BSB of the main business account
For larger purchases, Profit and Loss or other banking statements may be required to determine repayment abilities. Make sure you understand your deposit requirements to better assess the repayment schedules.
Benefits of a Chattel Mortgage
With any type of loan, there are benefits and drawbacks. To determine if a chattel mortgage is right for you, ensure you talk to us, and involve your accountant in the discussion. Benefits of a chattel mortgage include the following:
Since a chattel mortgage is less regulated, and the vehicle is used as collateral, the chattel mortgage is often a consideration for those with poor credit.
To qualify you will need to have an ABN and driver’s license.
- Less regulation allowing for flexibility to fit your financial needs as well as flexibility in repayment schedules
- Repayments are structured to fit your cashflow needs
- Ability to finance up to 100% of the purchase
- List ItemInterest rates are lowered as the loan becomes secured
- The loan is secured against the vehicle purchase
- Tax benefits, including the ability to claim Input Tax Credits if you are registered for GST
- Deposit options to reduce the borrowed amount
- Ability to reduce monthly repayments by setting up a final balance payment up to 60% of the loan amount
- Available to anyone with an ABN using the vehicle or equipment primarily for work
- Open to people with low or poor credit
Chattel Mortages FAQs
Common frequently asked questions. Of course, you are welcome to contact us any time on 0458 341 021.
Anyone holding an ABN who will be using the vehicle or equipment for business at least 50% of the time can qualify. This includes partnerships, sole proprietors, companies and trusts.
Any equipment, including vehicles that will be used primarily for business qualify for the chattel mortgage. As long as you can show the vehicle or equipment will be used for business at least 50% of the time, it qualifies for a chattel mortgage.
This will vary depending on your cashflow needs. Chattel mortgages can be used to finance any amount of the purchase price, up to 100%. This will be up to you based on your financial abilities. You decide how much you pay for a deposit, you decide how to set up the final payment. All these decisions help determine what your repayment plan will be.
There is potential to claim deductions for interest rates and depreciation. Also, those registered for GST may be able to claim Input Tax Credits. You would need to speak with an accountant to determine the possibilities for your business.
Yes. The vehicle purchase acts as the collateral for the loan. This makes the chattel mortgage user friendly for people with poor credit. This loan also offers flexible repayment options making it easy to fit around your financial needs.