What best describes a lien?

A lien is best described as a claim on the property of another. This legal right allows a lienholder to hold a claim on a debtor’s property until the obligation, such as a debt or a legal obligation, is satisfied. Liens provide security to creditors, ensuring that they have a legal interest in the property as collateral for the payment of a debt.

For instance, if a homeowner takes out a mortgage, the lender typically places a lien on the property to secure the loan. This means that if the homeowner fails to repay the mortgage, the lender can enforce the lien and potentially force the sale of the property to recover the owed amount.

The other choices, such as a written contract, a type of insurance, and a method of payment, do not encapsulate the legal nature of a lien. A written contract refers to an agreement between parties, insurance serves to protect against specific risks, and a method of payment relates to the various ways transactions can occur. None of these accurately reflect the concept of a lien, which is fundamentally about establishing a claim on property as security for debt repayment.