Chattel Mortgage

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Definition - What does Chattel Mortgage mean?

A chattel mortgage is a loan arrangement in which the borrower temporarily transfers ownership of a property to the lender in order to secure a loan. Once the borrower repays the loan fully, they regain ownership of the property.

Chattel mortgages are often used in automobile sales.

Insuranceopedia explains Chattel Mortgage

As the name implies, the property involved in chattel mortgages are moveable property, such as cars or money. Unlike standard mortgages, chattel mortgages do not involve real property, like land or buildings.

The fact that ownership is at stake is what differentiates chattel mortgages from traditional loans. In the former, the owner is temporarily the financier or lender until the loan is paid. In the latter, the borrower retains the right of ownership and only relinquishes it if they fail to pay the loan.

When a person decides to buy an automobile through a chattel mortgage, for example, the lender gives them the money needed to buy the car but ownership is suspended until the loan is fully paid.


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