What is a Non-Recourse Loan?

A Non-Recourse Loan secures an asset as collateral, limiting lender claims to that item if the borrower defaults. In other words, the lender cannot pursue additional personal assets or income—only the pledged collateral. This structure protects borrowers but elevates lender risk, often leading to stricter qualification criteria or slightly higher interest rates to offset potential shortfalls.

• Borrower Shield: Personal liability remains minimal if post-sale shortfalls occur.
• Collateral Focus: Lenders rely on robust valuations or asset performance.
• Underwriting Rigor: Tighter scrutiny to confirm the item can repay the full loan.
• Interest Impact: Rates might reflect the lender’s more considerable exposure to default.

Non-recourse arrangements suit individuals seeking to preserve personal holdings or limit overall liability, granting them flexibility while fulfilling financing needs for large-scale transactions.