A chattel loan is secured financing where the collateral is movable personal property rather than land or a building attached to it. “Chattel” is the legal word for movable property, so the loan functions like a mortgage with one key difference: the lender’s lien sits on something that can be relocated, such as a piece of equipment, a commercial vehicle, or most commonly for individual consumers, a manufactured home sitting on rented land. You keep and use the asset from day one, but the lender holds a security interest until the balance is paid, and can repossess if you default. Interest rates run well above conventional mortgage rates. A CFPB analysis put the median rate on manufactured-home chattel loans at 8.6%, compared with 4.1% on site-built home loans.1Consumer Financial Protection Bureau. Manufactured Housing Finance: New Insights from the Home Mortgage Disclosure Act Data
Why the Collateral Type Matters
A traditional mortgage is secured by real property: land plus anything permanently attached. A chattel loan is secured by personal property, meaning assets you can physically move or sell separately from any land. That legal distinction drives almost everything else about how these loans behave.
Chattel loans are governed by the Uniform Commercial Code, specifically Article 9, which covers secured transactions in personal property.2Legal Information Institute. UCC – Article 9 – Secured Transactions The UCC is not federal law. It’s a model code each state adopts individually, sometimes with variations.3Uniform Law Commission. Uniform Commercial Code So repossession procedures, notice requirements, and how liens get recorded can vary by state.
The lender doesn’t take the property when the loan closes. It places a lien and lets you use the asset. The lien stays until the balance is paid, at which point the lender releases its security interest.4eCFR. 7 CFR 1962.27 – Termination or Satisfaction of Chattel Security Instruments
Where Chattel Loans Show Up
Chattel financing appears wherever someone needs to borrow against a high-value movable asset:
- Heavy equipment such as industrial generators, manufacturing machinery, and construction equipment.
- Agricultural implements including tractors and combines.
- Commercial vehicles like semi-trucks, delivery vans, and specialized utility vehicles, where the lien is noted on the title.
- Manufactured homes on rented land, which is where these loans affect the most individual consumers. When the home sits on land you don’t own, it’s classified as personal property rather than real estate, and standard mortgage financing is unavailable.5HUD Exchange. Manufactured Housing Quick Tips
The manufactured-home case deserves extra attention because the financial stakes for an individual borrower are steeper than for a business financing equipment. Unlike a site-built home that tends to appreciate, a manufactured home classified as personal property generally depreciates, losing value the way a vehicle does. You can end up owing more than the home is worth relatively quickly, especially with a small down payment.
What a Chattel Loan Costs
Rates run higher than on conventional mortgages because lenders treat movable collateral as riskier. It depreciates, can be damaged or relocated, and is harder to recover than a house bolted to a foundation. The CFPB study found the median rate on manufactured-home chattel loans was 8.6%, against 4.9% for manufactured homes financed as real property and 4.1% for site-built homes.1Consumer Financial Protection Bureau. Manufactured Housing Finance: New Insights from the Home Mortgage Disclosure Act Data Those exact numbers move with the market, but the gap has been persistent.
Rates can be fixed or variable. Fixed rates offer predictable payments and are what most borrowers choose for a long-term obligation. Loan terms are shorter than a 30-year mortgage and are tied to the expected useful life of the asset. Manufactured-home terms typically run 10 to 20 years. Heavy machinery loans might run 36 to 120 months depending on how long the asset stays productive.
Down payment requirements are also higher. Lenders commonly want at least 20% down on a manufactured home, and 30% or more is not unusual. Commercial equipment loans sometimes accept 10% to 20%, depending on your credit and the asset’s resale value. The point is to keep the loan balance from exceeding the collateral’s value from day one.
Late Fees and Prepayment
If your chattel loan is secured by a manufactured home and qualifies as a high-cost mortgage under the Home Ownership and Equity Protection Act, federal law caps late charges at 4% of the past-due installment and requires a 15-day grace period before the fee is assessed.6Fannie Mae. Key Legal Distinctions Between Manufactured Home Chattel Lending and Real Property Lending
Federal rules also restrict prepayment penalties on chattel loans secured by your home. HOEPA high-cost loans cannot carry any prepayment penalty.7eCFR. 12 CFR 1026.32 – Requirements for High-Cost Mortgages For other dwelling-secured chattel loans, Regulation Z caps prepayment penalties at 2% of the amount prepaid during the first two years, 1% during the third year, and zero after that. Commercial equipment and vehicle chattel loans don’t get these federal protections; prepayment terms sit in the contract, so read them before signing.
How the Lender Locks In Its Security
Writing a lien into the contract isn’t enough by itself. To protect its position against other creditors, the lender must “perfect” the security interest, a legal step that puts the world on notice that a specific asset is pledged.
The method depends on the asset:
- For equipment, inventory, and other untitled property, the lender files a UCC-1 Financing Statement with the appropriate Secretary of State’s office. Filing fees generally range from about $10 to $100 depending on the state and format.
- For titled property such as vehicles and some manufactured homes, the lender’s lien is noted directly on the certificate of title through the state’s motor vehicle agency. Lien notation fees typically fall in the $5 to $25 range.
Either way, the record is public. If you try to sell the asset without paying off the loan, the buyer or their lender will find the existing lien.2Legal Information Institute. UCC – Article 9 – Secured Transactions
Insurance the Lender Will Require
Expect to carry hazard insurance on the collateral for the full loan term, covering damage or loss from events like fire, theft, or natural disasters. For a manufactured home, that means a policy designed for manufactured or mobile home structures, not a standard homeowner’s policy. The lender will be named as loss payee, and minimum coverage is typically the lesser of the asset’s value or the outstanding balance. If your coverage lapses, the lender can buy force-placed insurance on your behalf and bill you, which is almost always more expensive than what you’d pay on your own.8eCFR. 24 CFR Part 201 Subpart F – Default Under the Loan Obligation
What Happens If You Default
Default moves faster than a traditional foreclosure, and the financial consequences can outlast the asset.
Nearly every chattel loan carries an acceleration clause, which lets the lender declare the entire remaining balance immediately due on default rather than just the missed payments. From there, the lender can pursue repossession. Under the UCC, that can happen through court proceedings or without going to court, as long as taking the property doesn’t cause a breach of the peace.9Legal Information Institute. UCC 9-609 – Secured Party’s Right to Take Possession After Default A repo agent can pull equipment off your lot or tow a vehicle from your driveway. They cannot break into a locked garage or physically confront you.
Before selling the property, the lender must send you reasonable notice of the planned sale.10Legal Information Institute. UCC 9-611 – Notification Before Disposition of Collateral The sale itself must be conducted in a commercially reasonable manner, whether by public auction or private sale.11Legal Information Institute. UCC 9-610 – Disposition of Collateral After Default
Deficiency Balances
This is where borrowers get blindsided. If the sale brings in less than what you owe, you remain liable for the difference. The UCC is explicit on that point.12Legal Information Institute. UCC 9-615 – Application of Proceeds of Disposition; Liability for Deficiency and Right to Surplus For a manufactured home that has depreciated substantially, that can mean losing the home and still owing thousands. If the sale produces more than the balance, the lender owes you the surplus.
Deficiency risk is especially acute with manufactured homes because the asset depreciates while the loan balance shrinks more slowly, particularly in the early years when most of your payment goes to interest. This is the single biggest financial risk of chattel financing for housing.
Federal Protections If a Manufactured Home Secures the Loan
Manufactured homes classified as personal property have historically fallen outside conventional mortgage rules, which left buyers with fewer protections than site-built homeowners. Federal law has closed some of those gaps.
HOEPA applies to chattel loans secured by your principal dwelling when the loan crosses certain cost thresholds. The law’s definition of “dwelling” specifically includes structures classified as personal property under state law, which captures manufactured homes financed with chattel loans.7eCFR. 12 CFR 1026.32 – Requirements for High-Cost Mortgages
A manufactured-home chattel loan is classified as a high-cost mortgage if the APR exceeds the average prime offer rate by more than 8.5 percentage points when the home is personal property and the loan amount is under $50,000, or by more than 6.5 percentage points for larger first-lien loans.7eCFR. 12 CFR 1026.32 – Requirements for High-Cost Mortgages A loan also triggers HOEPA if total points and fees exceed 5% of the loan amount for loans of $27,592 or more, or the lesser of $1,380 or 8% for smaller loans as of 2026.13Federal Register. Truth in Lending (Regulation Z) Annual Threshold Adjustments (Credit Cards, HOEPA, and Qualified Mortgages)
When a loan is classified as high-cost, the lender faces real restrictions: no prepayment penalties, capped late fees, mandatory pre-closing disclosures, and a prohibition on making the loan without regard to your ability to repay.7eCFR. 12 CFR 1026.32 – Requirements for High-Cost Mortgages CFPB data showed nearly 94% of manufactured-home chattel loans qualify as higher-priced loans, so a meaningful share may trigger HOEPA.1Consumer Financial Protection Bureau. Manufactured Housing Finance: New Insights from the Home Mortgage Disclosure Act Data
The Truth in Lending Act’s three-day right of rescission can also apply to certain chattel loans secured by your principal dwelling, because the same expanded definition of “dwelling” covers manufactured homes classified as personal property. A loan used to purchase the home is exempt as a “residential mortgage transaction.”14Consumer Financial Protection Bureau. Regulation Z 1026.23 – Right of Rescission Where rescission does apply is when you refinance an existing chattel loan or take out a new loan secured by a manufactured home you already own.
Alternatives Worth Comparing
Converting to Real Property
If you own or buy the land under a manufactured home, converting the home from personal property to real estate opens the door to conventional mortgage financing, with lower rates, longer terms, and stronger consumer protections. The process varies by state but generally requires permanently affixing the home to a foundation, surrendering the personal-property title to the appropriate state agency, and filing an affidavit of affixture in the local land records.5HUD Exchange. Manufactured Housing Quick Tips Once the state cancels the personal-property title and the home is recorded as part of the real estate, you can finance or refinance with a standard mortgage lien recorded against the land and home together.15Freddie Mac. Real Property, Title and Lien Requirements for Mortgages Secured by Manufactured Homes
The barriers are real. You have to own the land, be willing to encumber it, and pay for the foundation and conversion. Many chattel-loan borrowers live in manufactured-home communities on rented lots, which makes conversion impossible. For them, the chattel loan isn’t a stepping stone; it’s the only option.
FHA Title I Loans
The FHA Title I program offers a government-insured chattel loan for manufactured homes and does not require you to own the land. A lease with at least three years remaining is enough, which makes it accessible to borrowers in manufactured-home communities. HUD’s current loan limits are $105,532 for a single-section home and $193,719 for a multi-section home, with maximum terms of 20 years for a single-section home and 25 years for a multi-section home with a lot.
Title I doesn’t erase the higher-cost nature of chattel financing, but it provides a federally insured option with standardized terms and consumer protections that some private chattel loans lack. If conversion to real property isn’t possible, put a Title I offer next to any private lender’s terms before you sign.