A chattel mortgage is an older term that refers to a loan to purchase a car or piece of equipment, which is then used as security against the loan. Some lenders, including NAB may call it an equipment loan.
How a chattel mortgage works
An old English term 'a chattel' is a moveable item that you can take ownership of. In the context of a chattel mortgage, it refers to a vehicle, car or piece of equipment you wish to buy for your business.
The mortgage is the type of loan a lender gives you to buy the vehicle. While the vehicle or equipment is owned by the business, the lender uses the vehicle as security against the loan. This gives the lender piece of mind you’ll pay back the loan. It’s much like a fixed rate traditional home loan or mortgage.
Benefits of a chattel mortgage for a business
- Interest rates are usually lower than an unsecured loan, such as a consumer car loan.
- Unlike a hire purchase or finance lease, a chattel mortgage gives you ownership from the start, so it appears as an asset for your business as well as a liability (the loan).
- There may be some tax benefits of a chattel mortgage. You’re entitled to claim an input tax credit up front, and you may also be able to claim interest and depreciation costs depending on how much you use your car or equipment.
- Repayments can be fixed. They can also be structured to suit the cash flow of your business.
- You can choose to set a balloon payment at the end of the term. This gives your business the ability to decide whether you’d prefer to keep your monthly repayments down by paying more at the end of the term.
Our vehicle and equipment finance solution
At NAB, we offer a business vehicle and equipment loan. Like a chattel mortgage, it allows you to purchase vehicles or equipment with no upfront deposit so you can keep the money in your business. Generally, the only security needed is the asset itself. This might be a good option for you if:
- your business has a valid Australian Business Number (ABN)
- you intend to use the product mostly for business purposes.
If you’re not sure if this is the right finance option for you and your business, we have some handy tools that could help. You can calculate what your repayments would be, and view our chattel mortgage interest rates.
Explore our range of guides and articles to learn more about purchasing vehicles and equipment.
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The information contained in this article is correct as of July 2018 and is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.