A chattel mortgage is usually a loan obtained against a personal property that excludes real estate, building or any permanent fixtures. In other words, a chattel mortgage is a debt secured against a moveable personal property which when removed does not affect any freehold property or any real estate that is held for life. Here, it is essential to mention that the authorized character of a chattel mortgage changes the moment the credit is linked to a fixed or set real estate. As there is no fixed regulation regarding the transformation of a chattel mortgage to a fixed property, the change is usually determined by the prevailing situations. However, in most cases the measure as well as the object included in the purview of the mortgage forms the determining aspect in such cases.
In brief, an individual can obtain a chattel mortgage on moveable personal property such as vehicles, aircraft, boats and trailers or possessions like appliances, gadgets, televisions and music systems which when removed will not cause any damage to a freehold estate like land or building owned by the borrower. While the chattel mortgage is one of the three most common procedures of granting credit against any portable personal belongings, the other two methods include conditional sales contract or any lease along with the provision of purchasing the security, such as computers, home theatres and even photocopying machines.
Regional laws in Canada do deal with the issue of registering a chattel mortgage, but the laws differ from one province to another. In fact, even the application of the regulations to vary depending on the prevalent law of a particular jurisdiction. For instance, in the provinces like Ontario and Manitoba the Personal Property Security Act controls administers the processes of accepting security against chattel mortgages and accords high priority to listing the mortgages in view of the security concerns of both parties involved in the deal.
A chattel mortgage offers numerous benefits, including flexible agreement periods and fixed interest rates, to the borrower. While this type of loan against security enables the borrower to avail supple repayment terms that may vary from24 months (two years) to 60 months (five years). A chattel mortgage also enables the borrower to affect a residual value or salvage value, calculable on the basis of the depreciation of the security, to the loan agreement with a view to adjust the monthly repayments according to his or her budget. In addition, the other advantages of a chattel mortgage include unchanging interest fees, set repayments every month, having prior knowledge of expenses involved, and options to make deposits either in cash or exchange. Chattel mortgage also has a provision for tax rebates in the vehicle against which a loan has been granted is used for official or business reason. Moreover, a borrower who has listed for GST or the goods and services tax is eligible to apply for and receive the GST included in the price of the vehicle as an input credit (an amount paid as GST on any item bought for business purposes) on his or her business transaction declaration for the subsequent fiscal year. At the same time, the borrower need not have to pay GST on the repayments made every month or the residual value of the amount mentioned in the original chattel mortgage agreement. Finally, as the mortgage loan has been granted against the vehicle (security), the interest fees are comparatively low in the case of a chattel mortgage.