Chrysler Financial repays $1.5 bln US gov't loans

DETROIT, July 14 (Reuters) - Chrysler Financial said on Tuesday it has paid off $1.5 billion in loans it had received from the U.S. Department of Treasury in January to fund vehicle loans and incentive programs for Chrysler consumers.

Chrysler Financial, the former lending arm of Chrysler (FIA.MI), received the funding from the U.S. Treasury's financial bailout package, or Troubled Asset Relief Program, to support the automaker's sales by providing incentives and consumer loans.

As part of the U.S. government-sponsored restructuring of Chrysler and General Motors, GMAC is taking over responsibility for providing loans to finance inventory for Chrysler dealers from Chrysler Financial.

GMAC has also taken over the financing of the low-interest loans used by Chrysler to move slower-selling inventory.

The changes leave Chrysler Financial with a reduced scope of operations. The firm, fully owned by Cerberus Capital Management [CBS.UL], continues to offer insurance to car dealerships and alternative financing for consumers purchasing new vehicles. (Reporting by Soyoung Kim; Editing by Gary Hill)