A lien on a vehicle is a legal contract that allows the financial lender the right to repossess a vehicle if the borrower does not make any effort to pay back the monies owed for the vehicle. Banks and financial institutions use liens as insurance.
Liens are placed on financial loans to ensure that, if the person borrowing the money fails to repay the loan, the loaner can make a legal claim to the vehicle and repossess it. Once the vehicle has been repossessed, the financial institution has the right to sell the vehicle to try to recoup some of the money owed. Liens are taken off vehicles once the debt has been paid in full.