Definition of chattel mortgage
Chattel mortgage (sometimes abbreviated to CM) is the legal term for a type of loan contract used in some states which have adopted the English law concept.
Under a chattel mortgage, the purchaser borrows funds for the purchase of movable personal property (the chattel) from the lender. The lender then secures the loan with a mortgage over the chattel. Legal ownership of the chattel is transferred to the purchaser at the time of purchase, and the mortgage is removed once the loan has been repaid.
Chattel Mortgages in Australia
Chattel mortgages are commonly used by businesses (including companies, partnerships and sole traders) in Australia to fund the purchase of cars, commercial vehicles and other business equipment.
Under Australian Taxation Office rules, businesses who account for GST on a cash basis are entitled to claim an Input Tax Credit for all of the GST contained in the purchase price of the chattel on their next Business Activity Statement.
Chattel mortgages in most Australian states attract stamp duty on the repayments.
In the United States
In the United States, chattel mortgages are referred to as secured transactions. Such transactions are governed in most states by Article 9 of the Uniform Commercial Code.
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