Chattel mortgages are the common form of loan arrangements used by businesses that need to purchase new equipment. This loan arrangement requires security that involves movable personal property. Applying for this type of loan offers several benefits that are useful for the borrower. However, despite of benefits that it offers, Chattel mortgages also pose risk particularly in terms of the interest rates. It is because the interest rates are affected by several factors making it quiet higher.
One of the risk factors that influence Chattel mortgage is the economy. Usually, borrowers are wondering about the higher interest rates involved in this type of loan. This means that if the economy increases the rate of Chattel mortgage rises as well. On the other hand, if the economy starts to decline the rate also falls.
Another risk factor in getting Chattel mortgage is the prime rate. Lenders are offering prime rate to borrowers having good credit history. Nevertheless, for those typical borrowers, the lenders are adding some percentage to the prime rate as they are taking the risk of giving out cash.
Obtaining Chattel mortgage is most likely risky in terms of interest rates. It is because the interest rates escalate due to discount rate that the Federal Reserve charges to different banks and lenders. Thus, the increase in discount rate also affects the raise of prime rate as well as the interest rate. In this sense, if the interest rate rises, it would be difficult for the borrower in securing a loan.
Even if Chattel Mortgage is implementing fixed interest rates, still borrowers should expect that it will fluctuate from time to time. Nevertheless, among other forms of loan, this one is still the safest option. That is why in order to avoid the risks in getting Chattel Mortgages; the best thing to do is understand first how this type of loan works and other important details.
In addition, there are also other risk factors that can affect the efficiency and effectiveness of this type of loan. As mentioned earlier, the economic standpoint plays significant role in making your decision in taking out mortgage. Keep in mind that being knowledgeable about the economy will reduce the risk of default or cash unavailability in repaying the mortgage. That is why if the economy is not growing steadily, then it is ideal for the borrower to take out short-term loan.
Therefore, if you own a business and needs equipment for expansion, then you should consider applying for Chattel Mortgage. This is the easiest way of obtaining equipment especially if you do not have enough funds to purchase the equipment in cash. Despite of having some risks, utilizing Chattel Mortgage is advantageous as compared to other types of mortgages. It is because the equipment purchased is registered automatically to the borrower as legal property. Even if the property is used as collateral, still the borrower can use it for the company. Indeed, Chattel Mortgages are great help for businesses in growing and expanding the business through an equipment loan.
Chattel mortgages are the flexible finance solution for business. In this chattel mortgage you are free to select the perfect method for you, that is you can finance the full purchase price, or you can include an upfront deposit or trade into reduce your rental commitment. You can get more information about chattel mortgages at Fincar.