Glossary
Lien
A legal claim against property that secures a debt — the lienholder can force a sale to collect if the debt goes unpaid.
A lien gives a lender or creditor a legal right to a specific asset until a debt is satisfied — a mortgage places a lien on your home, an auto loan on your car, and a title loan on your vehicle title specifically. Liens must generally be paid off before you can sell or refinance the property clear of them. Unpaid taxes or contractor bills can also create involuntary liens, which is why a title search is standard before any real estate purchase.
Related terms
- Prepayment penalty A fee some lenders charge for paying a loan off early. Rare on consumer loans, common in commercial lending — always check the note.
- Deed of trust A three-party document (borrower, lender, trustee) some states use instead of a mortgage to secure a home loan against the property.
- Origination fee An upfront charge (0–8% of the loan) deducted before funds reach you. A $10,000 loan with a 5% fee delivers $9,500 — but you repay all $10,000.
- Escrow A holding account your servicer uses to collect and pay property taxes and insurance alongside your mortgage payment.
- APR Annual percentage rate — the interest rate plus mandatory fees, expressed as one yearly cost. The only honest way to compare two loan offers.
- Promissory note The legal document where you promise to repay a loan under specific terms — amount, rate, schedule, and what happens on default.