What is a Chattel Mortgage?

Looking to buy a car or piece of equipment for your business, then a Chattel Mortgage is for you.

Also known as an equipment finance loan, this is a favoured option among small to medium business owners.

So, why is it so popular?

Because this type of business loan gives you ownership of the asset from the very start. There are also flexible options available, and it offers significant tax deductions. Bonus!

We know what you’re thinking though, ‘mortgage’ normally applies to a home, not an asset.

Well, there is in fact a link between a Chattel Mortgage and a home loan – in this situation, mortgage is referring to the structure of a fixed-rate home loan.

Okay, so how can a Chattel Mortgage benefit you?

Well, first of all, you cannot apply for a Chattel Mortgage if needing to buy a car to take you to and from the shops.

As a rule, a Chattel Mortgage can only be used when the financed asset is mostly used for business – so the car must be used for business purposes at least 50% of the time.

With that in mind, a Chattel Mortgage allows you to own the funded asset from the very start.

Unlike a Hire Purchase or a Finance Lease this loan shows up as an asset for your business, as well as a liability.

Interest rates are generally lower than an unsecured loan as well. This is due to the asset being secured by the bank.

There are also some tax benefits.

With a Chattel Mortgage you can claim input tax credits for the GST included in the business car or equipment’s price. You may also be able to claim interest and depreciation costs.

There is also the option for a flexible payment structure.

You can choose to set a balloon payment at the end of the term, allowing your business to keep your monthly repayments down.

So, if you’re needing funds to buy equipment for your business, then get in touch with a QPF Broker today. They’ll help you secure the best deal, whether it’s a Chattel Mortgage or equipment loan, because you now know, they’re the same thing.