How to use our chattel mortgage repayment calculator
It’s easy to calculate your chattel mortgage using just a few key pieces of information. Even if you haven’t applied for a loan yet, you can still get an idea of what your repayments will be using an indicative interest rate.
You can also factor in establishment fees and an optional balloon payment to accurately estimate your total finance costs. You’ll also see breakdown of interest payable over the loan term.
Loan details you'll need to enter
Chattel mortgage amount
The amount of money you’re borrowing under the chattel mortgage agreement. This is usually the same as the value of the vehicle or asset you’re buying, unless you’re contributing a deposit or borrowing additional funds to cover other costs. According to Money.com.au data, the average chattel mortgage is $59,820 for vehicles and $117,394 for machinery or equipment.
Interest rate and loan term
This is the fixed interest rate the lender will apply to your chattel mortgage. Your chattel mortgage rate will depend on your business risk profile, plus the length of your chattel mortgage (i.e. how long it will take to repay the loan).
Establishment fees
Any upfront fees charged by the lender when establishing your finance agreement. Keep in mind that lenders may also charge ongoing fees (e.g. monthly account keeping fees).
Balloon payment
Chattel mortgage agreements often come with a balloon payment option — usually calculated as a percentage of the total loan amount.
Why working out your repayments matters
Phil Collard, Money.com.au Asset Finance Expert
"All borrowers should ask themselves, what is my business comfortable paying per week, per fortnight, per month in terms of repayments? That then dictates most other decisions about your finance. There's no point in you doing a longer loan term to get lower regular payments than you can afford if you plan on paying it out in the first third of the loan period. It's just going to hurt you on the back end with extra interest or break costs."
Phil Collard, Money.com.au Asset Finance Expert
Chattel mortgage repayment calculation explained
Our chattel mortgage calculator uses an amortisation calculation method. This provides an accurate estimate of your repayments based on your loan amount, annual interest rate and loan term.
Your chattel mortgage is set up with a fixed rate and term. Your repayments will cover both the interest on your loan, and the principal amount.
Initially, a greater portion of your repayments will go towards repaying the interest amount. This is simply because the loan balance is higher at the start and interest is charged as a percentage of the balance.
Over time, more of your repayments will go towards reducing the principal amount, as the interest costs reduce.
The simple formula for calculating chattel mortgage repayments is: loan amount / discount factor. The discount factor is calculated by dividing the interest rate of your loan by the number of payments per year (12 for monthly, 26 for fortnightly, or 52 for weekly) to first obtain the periodic interest rate.
Chattel mortgage repayments calculation example
In the example below, we’ll use a $50,000 loan at a 12% interest rate, repaid monthly over five years without a balloon payment attached to the loan:
- Calculate the number of repayments for the loan period: Divide the annual interest rate (12%) by the number of repayment periods per year (12). In this case, 12 repayments over five years = 60 repayments over the loan term.
- Calculate the interest rate for the period: Divide the annual interest rate (12%) by the number of annual payments (12) = 1%. Then, convert it into a decimal representation = 0.01.
- Calculate the discount factor: Use the decimal figure above to calculate the discount factor: ((((1+0.01)^60) - 1) / (0.01(1+0.01)^60) = 44.9551.
- Calculate your monthly repayment amount: Divide the loan amount ($50,000) by the discount factor to find the monthly repayment amount: 50,000 / 44.9551= $1112.2208.
- Get your estimated repayment amount: Round this figure to a double-digit decimal amount. Your monthly repayments on this loan would be $1,112.22.
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