Chattel Mortgage Calculator Australia

A chattel mortgage is one of the most common ways Aussie businesses finance their assets.

The business owns the asset from day one but the lender uses it as security until they’ve paid it off. It’s very similar to a traditional mortgage (i.e. home loan) involving a house. However, in business, it comes with other benefits such as claiming GST upfront and depreciation on tax.

When it comes to a chattel mortgage loan (or any asset loan in general) there are many terms to learn. Each of them is important in its own way and to some degree is essential if you plan on getting a trailer loan for your business. Here are the top terms we suggest getting your head around:

• Chattel mortgage – A loan that is secured by the asset you purchase.
• Operating lease – An arrangement where you rent the equipment but don’t own it.
• Finance lease – Where you can lease the asset with the option to purchase at the end of the term.
• Commercial hire purchase – Pay for the asset in installments and own it later.
• No doc loan – Close to zero financial documentation is required for this loan.
• Low doc loan – Minimal paperwork for getting a loan.
• Full doc loan – Detailed financials are required by lenders to access better terms.
• Residual value – The estimated worth of your asset after it has fully depreciated.
• Balloon payment – A large payment at the end of the loan term.
• Depreciation benefits – Tax deductions for the asset use.
• Loan Principal – The original amount borrowed.
• Credit Score – Your rating of financial trustworthiness by credit companies.
• Lender Criteria – The lender rules to qualify for finance.
• GST – 10% tax applied to the purchase price.
• Tax deductibility – Your claimable expenses for financing.
• Asset turnover ratio – The measure of revenue from assets.
• Credit assessment – The lender’s evaluation of your borrowing capacity.
• Fixed interest rate – The fixed interest rate that does not fluctuate with the market.
• Variable interest rate – The interest rate that fluctuates with the market.
• Comparison rate – Interest rate plus fees and charges to show you the true cost of the loan.
• Broker fee – Our fee for arranging the finance deal.
• Early termination fee – A penalty for paying off your loan early.
• Bank statements – Your bank transactions to confirm you can afford the repayments.
• Input tax credit – Lets businesses claim back the GST they paid on business purchases.
• Financier – The lender who you secure the loan from.

But don’t worry! There’s no need to remember all of this. Our team of asset finance brokers is here to make this process quick, simple, and easy for you.

Most Australian businesses that have an ABN of 2 years and have been GST-registered for 2 years will be eligible for a chattel mortgage loan.

Lenders will look at the asset you’re buying and your business situation before giving you the approval. The type of asset also matters – it affects your interest rate and terms. Here’s how lenders generally group them:

• Primary assets like trucks, trailers, excavators, and newer machinery are the easiest to finance. They hold their value well, so you’ll get better rates.
• Secondary assets like medical or manufacturing equipment might come with slightly higher rates since they’re harder to resell.
• Tertiary assets like really old equipment or specialized gear are trickier to finance. Expect higher rates if they’re approved at all.

Not sure how your asset stacks up? Give us a call – we’ll help figure out where you stand and find the right lender.

The simple answer is yes. Most lenders understand that business is never a straight line and in some cases, you’ll need to reduce your monthly repayments or pull equity out of your asset. With a Chattel Mortgage, this is possible. Not all lenders will allow it so it’s best to speak with your asset finance broker to understand your options.

Reducing your chattel mortgage repayments comes down to a few core factors. Here’s what we recommend to our clients to keep costs low:

Loan Term Strategies

• Extend the chattel mortgage loan term (more months = smaller repayments)
• Balance term length against total interest paid
• Consider 5-7 year terms for optimal flexibility

Leave a Deposit

• A larger initial deposit will always reduce the principal & interest
• Lower borrowing amount means smaller monthly repayments
• Aim for 20-30% deposit if possible since you’ll also access lower rates (lenders like deposits)

Additional Tactics

• Choose an asset with a strong resale value (Category A or Primary Assets have better rates)
• Negotiate your asset pricing before financing (our team can help source and value your assets)
• Consider residual payment structures (i.e. balloon payments)
• Compare multiple lender options
• Consider a full-documentation loan to access a better rate

Pro Tip: Don’t just chase the lowest repayment. The cheapest option isn’t always the most cost-effective long-term. A slightly higher repayment might save you thousands in total interest. Our brokers will crunch the numbers, assess your financial situation, and find a sweet spot between repayment size and overall loan cost.

A balloon payment is a larger lump sum payment due at the end of your equipment finance loan term. Lenders allow the borrowers to include a balloon payment to help reduce their monthly repayments.

For example, if you have a $150,000 loan for an excavator with a 30% balloon payment, you’ll pay smaller monthly repayments but will need to pay $45,000 at the end of the loan.

While the balloon payment will definitely lower your repayments, planning for the final lump sum payment is important. You can pay it in full, refinance the balloon amount, or sell the equipment to cover the cost.

Unfortunately, we can’t offer financial advice (or tax advice), so this is something you will need to discuss with your accountant. However, here are some things to consider about getting a trailer loan:

• You will retain a lot of working capital which is critical for a business
• There are often tax advantages associated with a chattel mortgage loan
• The faster you can acquire the asset the faster it can earn income