Lien is the right given to the lender over a security to recover money in case the credit given to the borrower has not been repayable in accordance to the agreed terms
We go for loans when our cashflows are constrained. Loan against securities is a considerably less costly source of money compared to personal loans. Interest of 14 percent or higher is charged for most personal loans and loans against securities carry 10-13 percent. Mutual funds can be used as collateral while raising money. Lenders mark a lien on the mutual fund units used as collateral. This is how it is done.
What is Lien?
Lien is the right given to the creditor over the security to recover the money in case the credit granted to the borrower fails to be repayable in the manner agreed to. For loans against mutual funds the lien is recorded by the lender on the unit offered as security..
How do you mark your link?
The form for lien contains details of unitholder(s) as well as the folio’s number, and the number of units in respect of which the lien is marked. The lien form needs to be signed by the unitholders of the folio. All joint owners need to sign. The form should be accompanied with a letter from the creditor clearly specifying the details of the lender and bank account information.
The lien is placed on the units and it is not based on the value. The value of the units listed under lien may fluctuate.
The form for marking lien is available on the website of mutual funds and the registrar and transfer agent (RTAs). The time frame for filling out and submitting the form is approximately two to three working days. The financier is informed about the lien as it is marked and also sent to the investor via the statement of account.
Lien may also be marked online. “For online marking of lien, the investor visits the financier’s web portal and provides consent to make a loan against mutual funds units. Then the financier files the lien marking request against the specified number of units on the portfolio of the investor. After marking the lien, the lender is required to share the loan amount with the investor,” says Kamala Radhakrishnan Senior Vice President Business Marketing and Development, Computer Age Management Services.
While the process used by RTAs can be found on the websites or apps of selected lenders, it’s easy and secure. “Every step requires an OTP-based security authentication from the Investor who is a secure service,” says Sreekanth Nadella the CEO of Kfintech. “After selecting to borrow to mutual funds on any of the digital platforms offered by our partners, the user can complete the entire process in between 5 and 10 minutes” He adds.
RTAs have signed tie-ups in conjunction with select banks for the purpose of enabling this process of marking a lien online. If the bank you are working with does not have tie-ups with RTA or RTA, you will need to complete the physical process.
How does lien work?
The lien grants the power for the loaner to sell the parts of the mutual funds which are marked with the lien if the borrower cannot pay their loans. The lender can invoke the lien via a written letter sent to the house for all units or for part of it. If the borrower repays the loan, then the lien is cancelled by the lender in writing to the fund house.
If the units are listed as being in lien, the purchaser is unable to switch or redeem the units. The principal investments will continue to receive the payoffs in the form of dividends, or in other ways in accordance with the proposals of mutual funds. Dividends are paid to investors, if the units are held under lien. The units received by way of dividend reinvestment or the bonus, subdivision (split) in units or other method, would remain under lien. In the event of the death of the investor, the units that are under lien cannot be transmitted to the legal heir or nominee following the process of due process. It is the right of the lender to make sure that the interests prevail and the lender gets the loan amount first.
Lien Amount: What is it The Lien Amount, the Reasons for It, and Removal of Lien Mark
Banking is vast, and every associated task has a definite term to make it different from the other ones. Knowing every bank term is impossible, but at same time, it is possible to endeavor to gather accurate information on the most important ones. Did you ever find yourself in the scene and found your bank account lien Amount written on it? Did you realize what it stands for or chose to not pay attention to it because you didn’t know what it meant?
A minute-to-minute arrow placed on your bank account can significantly impact the transactions you make. You may have to pay a fee for similar reasons. So, rather than ignoring these warnings, take the time to learn about banking terms.
We are here to simplify the process for you by breaking down the lien amount and how to tackle this term. This guide also provides steps to remove the amount of the lien from different banks and the excellent way to check for the amount of the lien.
What is the Lien Amount?
A Lien amount is the locked or frozen money in your account , but not available for a certain time frame. The bank’s authorities usually limit the amount that can be utilized. The money will remain in your account but neither can you take it out or transfer it to another account. The amount of the lien is frozen until bank authorities decide to remove any lock on your account. There isn’t any limit to the amount you can lock, since the bank’s authorities have the right to block the bank’s entire balance and turn it into a loan amount.
How do I define Lien The Amount, or Lien Marked Meaning?
The next thing you should know when familiar with how the mount of lien works is to understand what the”liquid mark” on a bank account means. A bank account that has the word “liability” means that the borrower has allowed the lender to do so as a result of the recovery of funds derived from the fund. Usually, banks mark an account lien when a lender fails to repay the loan in accordance with the agreed-upon conditions. To recover the loan sanctioned on mutual funds by banks, they place an inscription on the lien that specifies the units of the fund that are used by the lender for the security.
Also check: Estimation Of A Construction Project