Posted in Finance, Accounting and Economics Terms, Total Reads: 338

Definition: Lien

A lien is the collateral property that the creditor takes into his hold to secure a loan.

The various types of securing a loan with collateral are:

a. Pledge: When a borrower “pledges” an asset and borrows against it, she loses the right to use it. This means usually that, the asset will lie with the lender.

b. Hypothecation: “Hypothecating” an asset gives the owner the right to use it, and the lender the right to seize and sell it in case of default.

c. Mortgage: Mortgage is used whenever the asset used as collateral, is immovable property.

d. Lien: A lien means the claim of the lender on any asset used to secure the loan.

The owner of the property, who issues the lien, is called as the lienee and the person who has accepted the benefit of this lien is called lienor or lien holder. A lien exists for example suppose I take an automobile loan from the bank, so bank will be the lien holder and the lien will be released when the loan is paid in full. Also the same is valid for most of the movable properties.


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