Unencumbered

Unencumbered is a property or securities that are not pledged as collateral or deposits. There are usually no problems when selling and transferring them. A property with no legal claims on it, a vehicle that is not subject to any liens, and a security the full payment for which was made in the form of cash are defined as unencumbered. 

Unencumbered explained 

As there is no encumbrance placed on an asset, an asset is owned, or possessed, by whoever holds title to it. It is specified in the official documents. Such assets are not pledged as security to a lender and there are no other claims registered against them. 

Statistically, many young people aged 18 to 30 years, especially those who finished their university education, own encumbered assets, as they can’t afford to buy a car or a house without using a bank loan. In this case, they can lose the asset if they can't pay the lender back. Paying off a loan debt provides them with the opportunity to become the rightful owner of the asset. After that the asset may be classified as unencumbered. To make sure that there is no encumbrance placed on the asset, a buyer can conduct a title search before buying a property or an asset. 

Difference between encumbered and Unencumbered property

There are no problems associated with the transfer of unencumbered assets as there is no third party involved in the process. In addition to this, the owner of the unencumbered property has the right to sell it at any price. 

By contrast, encumbered assets are available for people to buy but it may take a little longer to sell them. If the buyer wants to transfer the title to the new owner, he should contact the lender and get an approval from him. The lender generally provides requirements for a minimum sales price, which are necessary for paying off encumbrances on real estate. 

If a person cannot repay a debt to a creditor and goes bankrupt, he is considered to be the rightful owner of unencumbered assets. This allows the lender to recover lost assets and put it for sale later. 

Sometimes, the owner of the unencumbered property is not determined if it is sold in the open market as a part of the liquidation process. When the unencumbered asset is sold off, it is an opportunity for an individual to settle debt with a creditor.