Many people aren’t familiar with the concept of “lien,” even when they live in states that rely heavily on understanding just what lien is. Under “lien theory,” a lender technically retains interest in your property - whether you got a loan for a house, a car, a boat, etc. - and doesn’t release this “lien’ to you until the payment has been made in full. If you’re a borrower and you’ve finally seen the release of lien, it means that you’ve finally achieved full ownership in what you’ve been paying for all these years. It can be a great moment for a borrower, and even an achievement for a lender who made a successful loan.

But let’s take the perspective of the borrower right now. What does a release of lien form mean? Well, many lenders will retain lien in order to make sure that the ownership of the property in question is actually clear throughout the history of the loan. For example, if you were to attain full ownership of an asset immediately after being financed with a loan, you could theoretically start selling off “pieces” of that asset. The lender typically wants to deal with the original lender, which is why they like to retain “lien” when possible.

So what does that mean to the perspective of the borrower? It means that the actual title of the ownership of the asset you’ve acquired might not be in your name as you originally thought - or, at least, completely in your name. That’s why it’s important to read all of the fine print not only of your lending agreements, but the laws that pertain to loaning money in your state. And because the laws differ from state to state, there’s no telling what your personal situation might look like without a consultation with the right kind of lawyer or accountant.

In many cases, however, lien is a simple process that happens every time that a loan takes place. Lenders don’t often care about what happens to a piece of property after they lend the money; they just care that they’re able to collect money on it. But without the regular payments being made toward the debt the loan carries, suddenly the ability of a lender to maintain lien over the asset means that they have more control than you might have thought.

When it comes to home ownership, this lien system means that the lenders can quickly foreclose on your property - after all, they retain ownership! Because of this, they can often execute what is known as a nonjudicial foreclosure - or a sale of the property they handle themselves.

Understanding the implications of a lien loan can really benefit you and make sure that you keep the right attitude toward your loan for the entire loan’s duration. In many cases, it won’t affect anything as long as you make the payments - but if everyone could make loan payments, there’d be a lot less paperwork in the world than there really is.