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A Comprehensive Guide to Mastering the Art of Lien Marking

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Lien is the legal right granted to the lender in exchange for the security to collect money in the event that the loan given to the borrower isn’t paid back in accordance with the terms of agreement.

When our cash flow is limited. A loan against securities is a much less expensive source of money compared to personal loans. A rate of interest of 14 percent or more is due on the majority of personal loans, however, loans against securities cost 10-13 percent. Mutual funds can be used as collateral when seeking to raise funds. The lenders create a lien on the mutual fund units that are offered as collateral. This is how it works.

What is Lien?

Lien is the legal right granted by the bank over security to collect the amount owed in the event that the credit granted to the borrower isn’t paid back in accordance with the terms agreed to. If a loan is made against mutual funds the lien is branded as a loan by the lending institution on units that are offered as security.

What is the process of marking a link?

The lien form includes names of unitholder(s) and folio number, and the number of units on which the lien is dated. The form for requesting a lien must be signed by the unitholders of the folio. Joint holders must sign. The form must be accompanied by a written confirmation from the creditor clearly stating the information of the lender as well as the bank account information.

The lien is engraved on the units , it is not based on the value. The value of the units that are marked under lien may fluctuate.

The form for marking lien can be found on the site of the mutual fund as well as transfer agents and registrars (RTAs). The time frame for filling out and submission of the form is between about two to three days. The lender is informed of the lien that has been marked, and it is sent to the investor via the statement of account.

Lien may also be marked online. “For the online mark of a lien investors visit the website of the financier and gives consent to take out a loan against mutual fund units, and the financier then sends the lien marking request to the specified number of units on the portfolio of the investor. After the marking of the lien, the lender is required to share the loan amount to an investor.” states Kamala Radhakrishnan Senior Vice President Business Marketing and Development, Computer Age Management Services.

Although the procedure offered by RTAs is available through the apps or websites of a few lenders, it’s quick and secure. “Every step requires an OTP-based authorization from the Investor and this is a secure system,” says Sreekanth Nadella the CEO of Kfintech. “After choosing to take a loan to mutual funds on any of the digital platforms offered by our partners, investors can complete the entire process in five to 10 minutes” Nadella adds.

RTAs have formed tie-ups with a select group of banks to enable this method of marking lien online. If the bank you are working with doesn’t have an affiliation with RTA and you need to undergo the physical procedure.

How does lien work?

The lien grants the right for the loaner to sell the units of mutual funds that are so designated if the borrower fail to pay back the loan. The lender may invoke the lien through a letter to the fund house either in respect of all the units, or for portions of them. If the borrower pays back the loan, then the lien is cancelled by the lender in writing to the fund house.

If the units are listed as a lien, the buyer is unable to switch or redeem the units. The investments that are underlying be paid out in the form of dividends or other like to the plans of mutual funds. Dividends are paid out to investors when the units are held in lien. Units that are received in the form of dividend reinvestment, bonuses or subdivide (split) of unit, or any other method would remain in lien. If the investor dies, or incapacity of an investor, units in lien are not transferable to the nominee or legal heir following the proper process. In the case of a lender, his rights prevail and the lender is able to recover the loans that are outstanding first.

Lien Amount: What is it, reasons and removal of Lien Mark

Banking is vast and each task is assigned specific terms to make it different from other ones. Knowing each and every term in banking is difficult, however at the same time, you should try to get accurate information on the most important terms. Have you ever been in an occasion where you saw the lien amount of your bank account in a prominent place? Did you know the meaning behind it or did you choose to ignore itbecause you weren’t familiar with it?

A minute-to-minute arrow placed on your bank account could significantly affect the transactions you make. Perhaps you need to pay a penalty for similar reasons. Therefore, instead of ignoring these warnings, be aware of certain facts regarding banking terms.

We’re here to make the process easier for you to understand the amount of a lien and how to deal with this issue. This guide will also outline the steps for removing the amount of the lien from different banks and the perfect way to determine the amount of the lien.

How much is Lien?

A Lien amount is the unlocked or frozen amount in your account , but not available for a particular period of time. The bank’s authorities usually prohibit this amount from being utilized. The money remains in your account, however it is not possible to take it out or transfer it to a different account. The amount of the lien will remain frozen until bank officials decide to take away this lock. There is no limit set for the amount locked, because the bank has full power to limit the bank’s entire balance and convert it into a lien.

How do I define Lien the amount or Lien Marked Significance?

The next thing to learn after becoming familiar with that lien mounting is the meaning of the”liability mark” on a bank account signifies. A bank account that has the lien mark indicates that the borrower has granted the lender to use it in connection with the collection of funds derived from the fund. Usually, banks mark an account as a lien when the borrower is not able to pay the loan in accordance with the agreed-upon conditions. To recover the loan that was sanctioned by mutual fund companies, lenders put an account lien label that identifies the units of funds that the lender uses to secure the security.

Also check: Estimation Of A Construction Project

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