Chattel Mortgage
A chattel mortgage is a commercial finance option where a financier lends money to a business to purchase a truck or commercial vehicle (the “chattel”). The loan is secured by a mortgage over the vehicle. Essentially, the borrower takes ownership of the truck upon delivery and makes monthly repayments according to the finance agreement. It’s a way to finance movable assets like trucks, heavy machinery, or even manufactured homes that aren’t permanently attached to the land. Keep in mind that chattel mortgages typically have shorter terms and higher interest rates compared to traditional mortgages.
Hire Purchase
A hire purchase is an arrangement where a buyer makes an initial down payment and then pays the remaining balance, along with interest, in instalments. Here’s how it works:
- Initial Payment: The buyer pays an upfront amount.
- Instalments: The remaining balance is paid off in regular instalments.
- Ownership Transfer: Ownership of the asset (such as a truck) is not transferred until all payments are made.
- Protection for Vendor: Hire purchase plans protect vendors because they can repossess the asset if the buyer defaults on payments.
Remember, hire purchase is similar to rent-to-own, allowing buyers to afford expensive items over time. However, ownership only transfers at the end of the agreement.
