What Is A Lien?
If you’re looking to get a vehicle title loan, you’ve probably run across the term “lien” and may be wondering more about what it means. A lien as explained by The Balance is basically a claim on property by a one party (usually a creditor) that’s currently owned or being used by another party. Usually when your property has a lien on it, you cannot sell it until the lien is released, although there can be ways to do so if there’s a third party involved to mediate the sale and make sure that it’s enough to cover the amount due on the lien. The most common liens are liens against vehicles and homes, though in some cases you may also have others against your finances.
To understand liens better, you should know the types of liens and BizFilings made a list of them. The first type of lien is a consensual lien. This kind of lien is what’s used on most car, home and other high-value purchases that can’t be paid in one payment. You basically agree to pay the holder of the property you’ve purchased such as a car dealer or bank according to the schedule set. This could be either by a secured loan or an unsecured loan. If you But if, for example you defaulted on a car payment, the lienholder may be able to repossess the property if the lien’s terms allow for it.
The second type of lien is a statutory lien which basically allows the lienholder to take the property but it usually doesn’t require any court action such as a lawsuit or judgment. In most cases statutory liens are limited to IRS and tax cases, contractors or mechanics you hire to fix your vehicle or your home, and landlords if you’ve got a lease on commercial or business property, though in some rare cases residential landlords could take out a lien on personal property kept on the premises. Sometimes the lines are blurred between statutory and judicial liens, but usually judicial liens are a bit more serious in nature.
Judicial liens are what consensual liens could turn into if the lienholder decided to take action to regain their property. These usually involve hearings or lawsuits in which the debtor is forced to either give up the collateral used to obtain a loan, or may have other assets seized to cover the costs of a secured loan. Besides having a consensual lien already on the property, other things that could contribute to a judicial lien could be defaulting on credit card debt or mortgage payments, having your vehicle towed off and not paying the towing company, getting in an accident and not having enough insurance to cover all the damage or other things not granted by statute.
Liens factor in both when you apply for a vehicle title loan and when you obtain a vehicle title loan. If you have any type of lien on your vehicle prior to applying for a title loan, you need to have that lien released before you can apply. If the lien is a consensual lien between you and the dealer and your payments are nearly completed, a title loan agency may in some cases make an offer to pay it off, though they may deduct from your loan amount in order to do this. When you obtain a title loan, the title loan agency will also put a consensual lien on your vehicle since it now becomes an asset used to secure the loan.