Unencumbered

What does 'Unencumbered' mean

Unencumbered is an asset or property that is free and clear of any encumbrances such as creditor claims or liens. An unencumbered asset is much easier to sell or transfer than one with an encumbrance. Examples of typical unencumbered assets are a house without any mortgage or other lien on it, a car where the automobile loan has been paid off or stocks purchased in a cash account, rather than a margin account.




BREAKING DOWN 'Unencumbered'

For the majority of consumers, especially young couples and recent graduates, high-value assets such as real estate and cars are unlikely to be unencumbered, since these purchases are generally financed with debt. Over time, as the mortgage or car loan is paid off, these assets become unencumbered. A title search is a key part of the due diligence process for a buyer of real estate or a used car to check if the asset is indeed unencumbered or has outstanding liens.

RELATED TERMS
  1. Defective Title

    A piece of property or asset that has a publicly-recorded encumbrance, ...
  2. Lien

    The legal right of a creditor to sell the collateral property ...
  3. Voluntary Lien

    A claim that one person has over the property of another as security ...
  4. Blanket Lien

    A lien that gives the right to seize, in the event of nonpayment, ...
  5. Home Lien

    A legal claim placed on a home that makes selling the home, obtaining ...
  6. Federal Tax Lien

    A federally authorized lien against any and all assets of a taxpayer ...
Related Articles
  1. Economics

    How Does a Lien Work?

    A lien gives a creditor the legal right to seize and sell property, then use the proceeds to pay off a borrower’s debt.
  2. Investing Basics

    Investing In Property Tax Liens

    Property tax liens can be a viable investment alternative for experienced investors that are familiar with the real estate market.
  3. Home & Auto

    Equity Stripping Leaves Creditors Empty-Handed

    Add additional debt to your real estate assets to keep the creditors at bay.
  4. Investing

    Free Cash Flow vs EBITDA: Which Should You Analyze?

    FCF and EBITDA are two ways of looking at the earnings of a business. EBITDA might be better for comparison purposes, while FCF is good for valuation.
  5. Credit & Loans

    Getting A Car Title Loan

    This loan-of-last-resort uses your car as collateral and features very high interest rates and fees. Be extremely wary of even considering one.
  6. Taxes

    Start Over With The IRS

    If you're struggling to pay back taxes, try a fresh start with the IRS. They really can help.
  7. Credit & Loans

    States That Allow Car Title Loans

    Only some states permit car title loans – and those that do may have restrictions. Check this list to see what to expect.
  8. Budgeting

    Options For When You Can No Longer Afford Your Car

    If you have more car than you can afford, here are four ways to deal with this "debt on wheels."
  9. Personal Finance

    5 Ways To Get Top Dollar For Your Used Car

    Unlike the housing market, the used car market is a seller's market. Here's how to get your car ready for an unbelievable offer.
  10. Credit & Loans

    Check Your Credit Report

    Make sure there are no errors holding you back from obtaining a loan.
RELATED FAQS
  1. How do I avoid a tax lien on my property?

    Find out the best way to prevent the government from placing a lien on your property, including the consequences of having ... Read Answer >>
  2. What is the difference between a possessory and a non-possessory lien?

    Gain a basic understanding of a possessory lien and a non-possessory lien, the key differences between the two structures ... Read Answer >>
  3. Can credit card creditors put a lien in house property?

  4. What real estate documents need to be recorded?

    Learn how recording documents on real estate transactions, such as deeds, mortgages, easements and taxes, help ensure proper ... Read Answer >>
  5. Are stocks real assets?

    Learn why stocks are classified as financial assets, not real assets. Understand the properties that determine whether an ... Read Answer >>
  6. Are current assets liquid or capital?

    Take a deeper look at liquid current assets for businesses and individuals, and learn how they differ from other types of ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center