The debtor agrees to sell the chattel to the creditor, but subject to an agreed right to repurchase it when the debt is repaid.

Historically, this type of agreement was known as a 'chattel mortgage'. From the creditor's point of view, this type of agreement provides good security, because they acquire full rights of ownership of the property, subject only to the debtor's right to repurchase. If the debtor defaults, the creditor, as owner, can sell the property to recover the debt. Any excess monies received must be paid to the debtor.

From the debtor's point of view, the arrangement is less attractive. Having made the creditor owner of the property, the debtor takes the risk that the creditor will deal with it improperly. Also, as owner, the creditor has the right to possession of the property, and if the debtor wants to remain in possession, this will have to be agreed. Finally, such an arrangement can only be entered into with one creditor, even if the property is worth much more than the debt owed.