What is the fundamental basis of a chattel mortgage?

A chattel mortgage fundamentally pertains to moveable possessions, distinguishing it from mortgages related to real property, which involve immovable assets like land and buildings. In a chattel mortgage, the borrower receives funds to purchase personal property, such as vehicles or equipment, while the lender retains a security interest in that property until the loan is repaid. This means that even though the borrower possesses the item, the lender has the right to reclaim it if the borrower defaults on the loan.

Understanding the nature of moveable possessions is crucial in recognizing how a chattel mortgage operates. The ownership is typically with the borrower, but the lender's security interest encumbers the property, offering protection for the loan provided. This highlights the key characteristics that differentiate chattel mortgages from traditional real estate mortgages, where the property itself serves as collateral and typically involves long-term financing for immovable structures.