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Finance Dictionary and Glossary of Investment Terms
Lien
Definition 1.
When a creditor or bank has the right to sell mortgaged or collateral property of those who fail to meet the obligations of their loan contract.
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Definition 2.
security interest in one or more assets that lenders hold in exchange for secured debt financing.
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Definition 3.
A legal claim against an asset which is used to secure a loan and which must be paid when the property is sold. Liens can be structured in many different ways. In some cases, the creditor will have legal claim against an asset, but not actually hold it in possession, while in other cases the creditor will actually hold on to the asset until the debt is paid off. The former is a more common arrangement when the asset is productive, since the creditor would prefer that the asset be used to produce a stream of income to pay off debt rather than just held in possession and not used. A claim can hold against an asset until all the obligations to the creditor are cleared (a general lien), or just until the obligations against that particular assets are cleared (a particular lien).
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