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By Emily Roberts
Whenever you borrow a significant amount of money from a lender, they will do their due diligence beforehand. This means ensuring that you are able to repay the money that you borrow on time and in full. A lien is a tool that lenders can use to secure their loans and lend money more confidently. Here is a short guide that explains a bit more about what a lien is exactly.
What Does a Lien Entail?
When a lien is placed on a property, it gives someone – usually a lender – the legal right to the subject’s property. With a lien in place, creditors are able to take property from borrowers in order to cover the money that they are owed. Liens are nearly always the result of a default on a debt, although they can also be awarded as judgments following some legal proceedings.
For example, let’s say that you take out a loan in order to purchase a new home. Often when you take out a loan, you will be required to put up some form of collateral: assets that can be used to cover the money you owe if you are unable to keep up with your payments. For the most part, lenders don’t have a tremendous amount of leverage and are therefore eager to find some way of protecting their loan.
What exactly can you offer that would satisfy the bank’s anxieties? The answer is to allow them to become the lienholder on your property. This doesn’t mean that they automatically have any rights to your property, but it does mean that if you don’t keep up with your debt repayments, then they can come for your property as recompense.
Liens are a matter of public record: something else which is important to know for borrowers and lenders alike. For lenders, publicly available lien records can indicate that an individual has already granted someone else rights to a property. You can have multiple liens, but many creditors will be reluctant to lend to you if they know that they are at the back of the queue when it comes to repayment of debts.
You can search for lien records, among others, by using the following site: https://publicrecordsreviews.com/lien-records. [Site is in the US and aimed at Americans: editor] Public Records Reviews enables you to search through a variety of public records for information about specific individuals – you can even use the service to check for your own records. Note that the lien records on Public Records Reviews are attached to individuals rather than properties. In other words, you will have to search for the homeowner rather than the home itself.
When are Liens used?
Liens are most commonly associated with loans and money lending. We have already covered home loans, perhaps the most common arena for liens to be used for, but another important category is auto loans.
Other than homes, cars are the next big-ticket purchase that many people take out a loan to cover the costs. As with a home loan, if you are unable to keep up with your repayment schedule for an auto loan then your lender can seize your new vehicle from you instead.
If you hire contractors to undertake any renovations or other work on your property and are unable to pay them as agreed, they can file a mechanic’s lien in order to recoup their losses. Note that this can also occur in instances where a contractor has failed to pay a subcontractor. Even if this is beyond your control, the workers will have a right to file for a lien if they choose to.
Finally, liens can also be awarded by courts as judgments arising from lawsuits. There doesn’t necessarily need to be any pre-existing agreement in place – if you owe money that you can’t pay to someone and they aren’t able to collect the debt, they might choose to apply for a lien instead.
Removing a Lien
If any property that you currently own has a lien against it, there are potential remedies to the situation. For the most part, a lien can only be removed by whoever filed for it originally. However, there are some exceptions to this policy:
Pay the Debt
If the lien is legitimate and beyond dispute, then the best solution for you is to pay it off. However, when you sell your home or a car that is under finance, the lien is usually removed automatically.
Apply for a Correction
If you think there are any errors in the detail of the lien you have been presented with, you can apply to have the record corrected. Your best course of action is to first contact the lienholder – in most cases, the lien has simply not been removed following the sale of the property.
Go through a Dispute process
If you think that a lien is entirely invalid, you are going to have a fight on your hands. If the lienholder isn’t willing to remove the lien themselves, you will need to take them to court and go through the full legal process.
It is important that anyone who borrows money is aware of all the attached terms and conditions beforehand. Liens are a neat way for lenders to secure their loans and for borrowers to access loans more easily.
Emily Roberts is a young writer who is passionate about literature and blog writing.
Interesting article but the link only seems to allow searches in the US.