Understanding chattel mortgages

family cleaning their car

 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. 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.

Other benefits could include: 

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. 

Find out more

Contributor | Andrew Gamble, Head of Sales - Asset Finance

Andrew brings more than 20 years of experience in the finance industry. His strategic vision, leadership and his customer centric approach has contributed to the significant growth of Pepper Money's Asset Finance business. Read more.

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.

All applications for credit are subject to credit assessment, eligibility criteria and lending limits. Terms, conditions, fees and charges apply. 

The results of the borrowing power calculator are based on information you have provided and is to be used as a guide only. The output of the calculator is subject to the assumptions provided in the calculator (see 'about this calculator') and are subject to change. It does not constitute a quote, pre-qualification, approval for credit or an offer for credit and you should not enter commitments based on it. The interest rates do not reflect true interest rates and the formula used for the purpose of calculating estimated borrowing power is based on the assumption that interest rates remain constant for the chosen loan term. Your borrowing power amount will be different if a full application is submitted and we complete responsible lending assessment. The results in the calculator do not take into account loan setup or establishment fees nor government, statutory or lenders fees, which may be applicable from time to time. Calculator by Widgetworks.

Pepper Money Personal Loans is a brand of Pepper Money Limited. Credit is provided by Now Finance Group Pty Ltd, Australian Credit Licence Number 425142 as agent for NF Finco 2 Pty Limited ACN 164 213 030. Personal information for Pepper Money Personal Loans is collected, used and disclosed in accordance with Pepper’s Privacy Policy & the credit provider’s Privacy Policy.

Pepper Money Limited ABN 55 094 317 665; AFSL and Australian Credit Licence 286655 (“Pepper”). All rights reserved. Pepper is the servicer of home loans provided by Pepper Finance Corporation Limited ABN 51 094 317 647. Pepper Asset Finance Pty Limited ACN 165 183 317 Australian Credit Licence 458899 is the credit provider for asset finance loans.

Pepper and the Pepper Money logo are registered trademarks of Pepper Group Assets (Australia) Pty Limited and are used under licence.

Get in touch with a Lending Specialist

Tell us about your situation. The more we learn, the better we can help.