📝 One-liners · 65 cards
NEGATIVE LIEN
What is a negative lien in banking?
A negative lien is an undertaking given by a borrower to a bank that they will not create any charge or encumbrance on specified assets without the prior written consent of the bank.
What is the primary purpose of a negative lien in bank lending?
To restrict borrower from creating further charges on assets
How does a negative lien differ from a pledge?
Unlike a pledge, a negative lien does not involve transfer of possession of assets to the bank; it is merely a contractual restriction on the borrower's right to encumber the asset.
Does a negative lien give the bank any ownership right over the asset?
No, it only imposes a restriction on the borrower
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