What Is a Chattel Mortgage and How Do I Apply for One in Queensland?

Simon Smyth

6 days ago

3 min read

Updated: 4 hours ago

If you're a tradie or business owner looking to purchase a vehicle, machinery or equipment, you may not want to pay the full purchase price from your available business cash.

A chattel mortgage is one way of financing a business asset and spreading the cost over an agreed period.

For Cairns and Brisbane tradies, understanding how this type of finance works can make it easier to decide whether it suits the business.

What Is a Chattel Mortgage?

A chattel mortgage is a type of finance used to purchase an asset for business purposes.

The business purchases and owns the asset, while the lender uses that asset as security for the finance and releases the mortgage / charge placed on the asset when the finance is paid off.

Some lenders refer to a Chattel Mortgage as a Commercial Loan, in reality they are the same thing.

The business then makes repayments over the agreed finance term, generally between 1 - 7 years.

Chattel mortgages can be used for business assets such as:

utes and work vehicles
vans
trucks
trailers
machinery
plant and equipment
other business equipment.

For many businesses, the main reason for considering finance is straightforward. It allows the business to purchase the asset it needs without paying the entire cost upfront.

This can help keep more money available within the business for its other expenses and commitments.

How Are the Repayments Structured?

The amount borrowed is repaid over an agreed period.

The actual repayment will depend on the amount financed and the structure of the loan.

Some chattel mortgages may also have a balloon payment.

This means an agreed amount remains to be paid at the end of the finance term.

A balloon can reduce the regular repayment, but it also means there is a final amount that needs to be considered when setting up the finance.

The important point is to look beyond the regular repayment and understand the complete finance commitment.

How Do I Apply for a Chattel Mortgage in Queensland?

Applying for a chattel mortgage starts with knowing what you want to purchase and how much finance you require.

A lender will assess the application before deciding whether to provide finance. The information required can vary depending on the lender, the business and the asset being purchased.

Once the finance is approved and the required documents are completed, the purchase can proceed and repayments are made under the agreed finance arrangement.

The application process from start to finish can run from a couple of days to a week, depending on how complicated it is. The loan can't settle until the vehicle is delivered.

Approval can be sought while a vehicle is on order, which reduces the time to delivery once the vehicle arrives at the dealership.

What should be considered before applying for your new Chattel Mortgage or Commercial Loan

What is the value of the new item
When is the proposed delivery of the vehicle
Are there any additional items to be financed
Can the business provide a deposit, although this is generally not required
What are the repayments and are they affordable
Is the proposed loan term appropriate with the asset and business goals
Will a balloon be included, this reduces the monthly payments
Lender and interest rate considerations are discussed during these questions as well

Chattel Mortgage Finance for Cairns and Brisbane Tradies

At Tropic Books & Finance, we understand that purchasing another vehicle or piece of equipment is a business decision as much as it is a finance decision.

If you're a tradie or business owner in Cairns, Brisbane or elsewhere in Queensland looking at finance for a vehicle, machinery or equipment, Tropic Books & Finance can help you explore your options and obtain a no-obligation finance quote.