A chattel mortgage is a car loan used mostly to fulfil business needs. It is a type of loan where the object that is borrowed is also used as security. Chattel mortgages are extended on a movable property, which most commonly includes vehicles. The lender takes a ‘mortgage’ over the vehicle as security for the loan. Once the contract is completed, the borrower gets outright ownership of the vehicle. All such mortgages are then listed in a public registry, which enables third parties to know before moving ahead with any financial agreement if the borrowers want to use the same property as security for another loan.
5 Compelling Reasons Why You Need a Chattel Mortgage:
Chattel mortgages are extremely suitable financial options for self-employed individuals and small businesses. The flexibility that comes with a loan of this kind allows the borrower to receive a 100% loan with little to no deposit. A chattel mortgage might be the most beneficial financial option if you’re looking to buy a car for business purposes. Additional benefits of a chattel mortgage include:
1. Low-Interest Rates
Since the purchased asset is secured by the lender, chattel mortgages usually have lower interest rates, making them the perfect option for newly established companies with a small amount of savings.
2. Tax Benefits
Because cars purchased on chatter mortgages are used solely for business purposes, it becomes relatively more straightforward for the borrower to get tax deductions on them. Businesses can claim interest costs and input tax credit depending on the use of the asset for practical purposes.
3. Flexible repayments
Chattel mortgages allow a highly relaxed payment structure. Borrowers can set up a lump sum payment at the end of the loan term to reduce their monthly payments.
4. Cash Flow Benefits
Chattel mortgages come with the flexibility of adjusting its payment plan as per the cash flow of a business. Depending on the yearly revenue of a company, payment sizes can be tailored and suited to fit specific needs, instead of just offering the clients a rigid, unmanageable structure.
5. Length of term
The length of a chattel mortgage loan depends on the borrower. Businesses usually choose between loan terms of one to five years, depending on their cash flow and income. The right term length can be decided thorough evaluation of the vehicle’s usage in one year, its deprecation rate and predicted value at the end of the term.
Chattel mortgages are secure financial options with flexible options that are suitable for small to medium scale businesses. The risk factors involved with chattel mortgages are low because, in case of a default, the movable property can easily be sold off to cover any financial losses. With a loan like this, you can save thousands of dollars, a considerable amount of time, manage your cash flow, and maximise your savings. At the same time, your business continues to run as smoothly as ever!