What Does Lienholder on a Title Mean?

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When you finance a significant purchase, such as a house or a car, you receive the funds required to initiate your transaction from a financial backer – such as a bank – in exchange for forfeiture of certain rights in the event of your inability to pay back the money borrowed. The individual or organization that has the contractual right to reclaim your property in the event of non-payment is often referred to as the lienholder. This is due to the fact that the lien itself can be defined as a stake of ownership in the purchase by the entity financing it. Understanding what the term lienholder means, as well as the rights and privileges of a lienholder, can help you make smart decisions for your financial future.

Exploring Basic Lienholder Privileges

When you initiate the terms of your borrowing contract, it is quite likely that you agreed to a series of rules and stipulations related to the repayment of your fund and the actions that can be invoked in the event of non-payment. This information is primarily designed to ensure that the financial interests of the lienholder are protected in any scenario. Although the vast majority of individuals are thoroughly vetted by lending agencies before they are offered funding, the money given to the borrower upon acceptance of their application remains protected by the lienholder until repayment is completed.

Assessing Lienholder Actions

It is very important to distinguish between the rights and privileges of various organizations that allow fiscal borrowing. For example, credit card companies cannot claim a lien on purchases you make with their products. Generally speaking, lienholder privileges are commonly reserved for lenders engaging in secured lending, or lending reinforced with collateral, rather than unsecured lending, such as a credit card.

For purchases that involve a title of ownership, such as a car or a house, your lienholder will continue to exert what's considered a degree of influence over the property until you have completely satisfied the terms of your loan. These terms could influence a variety of actions, ranging from more obvious issues, such as repayment, to more specific details, such as converting sections of a home into rental property. Generally speaking, you should consult with your lender to ensure that you understand the full terms of your borrowing prior to initiating the agreement. Failure to do so could mean that you are taken by surprise in the unfortunate situation that you are unable to meet the financial obligations of your property.

Researching Tax Liens

Although tax liens do not necessarily involve the use of a title, they remain a significant element of the tax payment process which could have significant ramifications for those who fail to meet their legal tax obligations. The Internal Revenue Service has the ability to seize your property and sell it to satisfy any outstanding income or property tax debts that have accrued in your name. As you can see, there are severe consequences for not only failing to pay secured debts, but also failing to pay your taxes.

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About the Author

Ryan Cockerham is a nationally recognized author specializing in all things innovation, business and creativity. His work has served the business, nonprofit and political community. Ryan's work has been featured at Zacks Investment Research, SFGate Home Guides, Bloomberg, HuffPost and more.

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