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Non-Recourse Loans
A non-recourse loan is one in which no individual(s) are liable for the debt in the event that the company that applied for the loan and received the money defaults on payment. In other words, it is a loan in which the lender cannot claim more than the collateral as repayment in the event that there is payment default. A non-recourse loan is not unsecured. It is a secured loan in which the secured lender's recourse is to the pledged collateral.
The lender's only recourse in the event of default on the loan involves seizing the asset(s) pledged as collateral. The lender cannot take legal action in a non recourse loan against the borrower even if the proceeds from the sale of the seized assets are not sufficient to pay the balance due on the loan.
Edited by Michael C. Dennis. Mr. Dennis is the author of "1001 Collection Tools and Tips."