In finance, encumbered refers to assets that are pledged as collateral for a loan or other obligation, restricting their use or transfer until the obligation is fulfilled. Encumbrances can include mortgages, liens, and security interests, which give creditors legal claims against specific assets in case of default. Encumbered assets may have limitations on their sale or transfer until the associated liabilities are settled, affecting their liquidity and marketability. While providing lenders with security, encumbrances reduce the borrower's flexibility in managing assets and may impact their ability to obtain additional financing. Understanding encumbrances is essential for assessing asset value, risk exposure, and financial obligations.