Legal Definitions - chattel mortgage

Chattel Mortgage is an old-fashioned term that refers to a type of loan where the borrower puts up movable personal property, like a car or machinery, as collateral for the loan. The lender holds an interest in the property until the loan is paid off.

Today, these types of loans are called "security agreements" and are governed by Article 9 of the Uniform Commercial Code.

Let's say you want to buy a new car but don't have enough money to pay for it upfront. You could take out a chattel mortgage, using the car as collateral for the loan. The lender would hold an interest in the car until you paid off the loan.

Another example could be a business owner taking out a loan to buy new machinery for their factory. The machinery would be used as collateral for the loan, and the lender would hold an interest in it until the loan was paid off.

These examples illustrate how chattel mortgages work by using movable personal property as collateral for a loan.