A lien is a form of security that gives a creditor the right to take possession of a property if a debtor does not pay a debt. One type of lien, called a voluntary lien, is created by the agreement of both parties, the creditor and the debtor.

Voluntary liens are typically used in situations where the creditor is lending money to the debtor for the purchase of an asset, usually real estate. The creditor holds the lien on the property which acts as collateral to ensure repayment of a debt. In the event that the debtor fails to pay the debt, the creditor can then use the lien to take possession of the asset, sell it, and use the proceeds to pay the debt.

A voluntary lien can also serve as a deterrent to ensure the debtor pays, as it may affect their ability to use the property. For example, if the debtor fails to make the payments on a loan with a voluntary lien, the creditor could choose to foreclose and take over the property.

When using voluntary liens, it is wise to ensure that both parties understand the terms of the agreement and adhere to them. Both parties should also be aware that they can be held liable if either party breaches the terms of the agreement. Additionally, voluntary liens should also be filed with the local county recorder to make it an official record.

The use of voluntary liens is an important part of the financing for many real estate transactions. Business owners can also use them to secure financing for business purchases and investments. They are useful for both lenders and borrowers, as they create an added layer of security for both sides. With a voluntary lien in place, lenders have the assurance that their money will be repaid and borrowers can be protected from the risk of foreclosure in the event of a loan default.