What is a Chattel Mortgage?

A chattel mortgage refers specifically to a legal agreement involving personal property, where the borrower retains possession of the asset while the lender has a security interest in it. Unlike real estate mortgages, which are secured by immovable property, a chattel mortgage is associated with movable or personal property, such as vehicles or equipment.

In this arrangement, although the borrower continues to use and control the property, they must adhere to the terms of the mortgage. If the borrower defaults, the lender has the right to take possession of the property. This agreement benefits both parties: the borrower gets access to credit while still utilizing their assets, and the lender has a secured interest that can be enforced in case of non-payment.

The other choices do not accurately define a chattel mortgage. A mortgage on real estate property pertains to immovable assets, a type of lease agreement does not involve ownership or a security interest, and a lien against chattels without physical possession does not reflect the nature of a chattel mortgage, where the borrower maintains possession during the mortgage term.