Definition
A lien is a legal claim (security interest) over property that must be paid prior to selling the property.
Analysis
There are many types of consensual liens that are used to grant control of property in return for credit:
- A mortgage pledges real estate to the lender until the loan is repaid.
- A lender serves as the lienholder on a vehicle loan, where the automobile itself is collateral.
Sometimes, a consumer may face involuntary liens that are levied to impose control over property due to failure to pay:
- A mechanic’s lien may be placed on a vehicle until repairs are repaid.
- A construction lien may be placed on real property until contractor fees are paid.
- A tax lien may be imposed by a county or city government due to unpaid property taxes, or it may even by placed by the state or federal government for outstanding income tax liabilities.
There are other types of liens that are more specific to certain types of professionals, such as attorneys.
Many liens will show up on a credit report. Tax liens are public records that appear unfavorably on a credit report for up to 15 years.
