Understanding Chattel Mortgages

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 Estimated read time: 2 Minutes

If you're looking to buy a car for your business, a chattel mortgage could be an option for you. But what exactly is a chattel mortgage? We take a closer look at the features of the loan.  


What is a chattel mortgage? 

A chattel mortgage is a loan used to purchase business equipment (often a car or ute), which is then used as security against the loan. Similar to a regular mortgage, lenders provide funds to purchase the asset (known as the chattel). They  then register their security interest on the Personal Property Securities Register (PPSR) for the life of the loan. When all loan repayments have been made, you then become the owner of the asset. Essentially, it’s similar to a secured consumer loan, however designed specifically for business customers. 

Who are chattel mortgages for?

As a rule, this loan is used when the asset is to be used primarily for business purposes (more than 50% of the time). Although it can be used to finance a variety of equipment types, it’s usually used to finance motor vehicles.

Considerations of a chattel mortgage for business owners

A chattel mortgage is especially popular finance option for self-employed or small business owners, as it provides flexibility around repayments. In some cases, 100% of the loan may be financed – so no upfront costs need to be put down. 

Lower interest rate

Lower interest rate

The interest rate for a chattel mortgage will typically be lower than an unsecured loan as the asset is secured by the lender. 
Flexible payment structure

Flexible payment structure

It’s possible to set up a balloon or lump sum payment at the end of the term in order to lower your monthly repayments. A word of caution that a large balloon payment may increase the amount of interest paid over the entire loan term – so make sure this suits your circumstances.
Tax credit benefits

Tax credit benefits

Businesses may be able to claim depreciation and interest costs depending on the level of business use of the asset. In some cases, businesses may be able to claim a tax credit as the GST inclusive price of the asset is financed. It's important to understand that a chattel mortgage isn’t regulated under the National Consumer Credit Protection Act (NCCP Act), so it might be a good idea to speak with your accountant or financial advisor to understand the suitability of the loan for your business. 

We're here to help

Here at Pepper Money, our chattel mortgage is known as a commercial loan & mortgage. To learn more about our chattel mortgage rates, call on us on 137 377 or visit our commercial lending section.  

Did you know? We also offer financing for businesses that require funding for heavy machinery and a wide range of other business equipment. 


Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.

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