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So, I recently heard someone talk about a Lien as thought it was similar to a Loan. So, I googled various things for a while and came to no concrete, concise answer.

If a Lien or a Mortgage is a "type of Loan" then what are the benefactors of defining a Lien and Mortgage to begin with?

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2 Answers

up vote 7 down vote accepted

Lien is a record that can be put on your asset, meaning that any sale proceeds of the asset will go to a lien holder/lien holder must approve any transfer of ownership. The asset continues to belong to you though.

Loan is when someone gives you money and you promise to pay it back.

Mortgage is a specific case of a loan - loan is called "mortgage" when something is mortgaged in return (usually this refers to real estate, but auto loans are essentially the same). I.e.: the lender puts a lien on the property and has the right to sell it if you're in default on your loan obligation (a "regular" lien doesn't give that right).

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In many jurisdictions, there are also mechanic's liens that have different rules than the liens created by mortgages, construction loans and the like. The holder of a mechanic's lien can sue to have the lien enforced and a court can order the property sold even if though there is another lien (e.g. mortgage) that has precedence and will receive the bulk of the money from the sale (and the mechanic's lien holder might well be SOL in terms of what he will actually receive after the mortgage has been paid off). –  Dilip Sarwate Jul 16 '13 at 14:46
    
@Dilip that's like a "second mortgage" in the US, right? –  littleadv Jul 16 '13 at 15:44
    
Ah, perfect, thank you littleadv, Joe, and Dilip. Before I posted this question I looked over the wikipedia pages linked above and got lost on the differences between the three of them. –  Everlight Jul 16 '13 at 16:10
    
@littleadv Yes, it is like a second mortgage, but as the Wikipedia article on mechanic's liens points out, there are lots of different rules that apply to mechanic's liens, and the rules differ from state to state (and country to country). Mechanic's liens are filed when the property owner is already delinquent in paying the mechanic and can be enforced by courts, mortgage liens cannot be enforced while the mortgagee is current on the payments. –  Dilip Sarwate Jul 16 '13 at 16:10
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A lien or a mortgage is an optional part of a loan contract that grants the lender certain legal rights over the borrower's property in the event that the borrow defaults. A loan with a lien or a mortgage is a type of secured loan, where the borrower puts up assets (e.g., land titles, financial instruments, vehicles) that they can lose if they don't repay.

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