Chattel mortgage is basically mortgage for anything
other than real estate or items connected to real estate. It's derived from the
French word "chatel," which has evolved over the years from the Latin
word "caput," meaning "head." Vehicles are one of the most
common items acquired through chattel mortgage.
It works the same way as a consumer car loan, save for
a few differences. First, it's a business use loan, meaning a vehicle purchased
under chattel mortgage must be used for business at least 50 percent of the
time. Second, chattel mortgage rates are usually lower than those of regular
car loans.
Third, and arguably the most important difference,
chattel mortgages aren't protected under the National Consumer Credit
Protection (NCCP) Act of 2009 due to their business use. The NCCP Act requires
personal loans to be spelt out in detail, particularly the terms and
conditions, and fees. This provision, however, doesn't make consumer loans the
better choice.
Getting a consumer loan means registering the vehicle
under your own name, not the name of your business. This can have legal
ramifications in the long run, so you're better off securing chattel mortgage.
In addition, you would miss out on the benefits such as monthly payments not
being subjected to GST.
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