Things you need to know about Chattel Mortgage.
1. What is a Chattel Mortgage?
A Chattel Mortgage is a contract where property (e.g. a car) is put up as security by the debtor (the “mortgagor”) in the creditor’s (the “mortgagee”) favor for a loan or any other obligation. If the debtor fails to pay the loan or fulfill the obligation the creditor may foreclose the mortgage and sell the property on public auction. The proceeds of the sale will then be used to pay the debt.
A loan or obligation secured by a Chattel Mortgage is called a secured debt. On the other hand an obligation unsecured by any collateral is called an unsecured debt.
2. When do you need a Chattel Mortgage?
A Chattel Mortgage is often used in transactions involving money such as lending and borrowing of money. The lender will be more willing to lend money if the debt is secured by a mortgage.
3. How can a Chattel Mortgage protect you?
A Chattel Mortgage protects the lender by giving him / her a collateral that he / she can foreclose and sell to pay the loan if the borrower defaults (e.g. fails to pay). Generally, if the proceeds from the sale is insufficient to fully pay the loan, the lender can still claim the balance from the borrower.
For the borrower a Chattel Mortgage makes it easier to borrow money because lenders will be more willing to lend money if the debt is secured by a collateral. Hence, borrowers have easier access to financing.
4. How is a Chattel Mortgage different from a Real Estate Mortgage?
Both documents place a mortgage on the property. However, a Chattel Mortgage is used for movable property (e.g. car, jewelry) while a Real Estate Mortgage is used for immovable property (e.g. land, building).
5. What information do you need to create a Chattel Mortgage?
To create your Chattel Mortgage you’ll need the following minimum information:
- The type of mortgagor (e.g. individual or business) as well as name and details (e.g. nationality and address);
- The type of mortgagee (e.g. individual or business) as well as name and details (e.g. nationality and address);
- Brief description of the property being mortgaged (e.g. type of property); and
- Brief description of the obligation being secured (e.g. amount of the loan).
6. How much is the document?
The document costs PHP 450 for a one-time purchase. Once purchased you have unlimited use and revisions of this type of document.
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