non recourse debt is a type of loan secured by collateral commonly property if the borrower defaults the issuer can seize the collateral but cannot seek out the borrower for any further compensation even if the collateral does not cover the full value of the defaulted amount a non recourse debt does not hold the borrower personally liable for the loan 1
understanding non recourse debtnon recourse debt poses a greater risk to the lender than recourse debt especially if the resale value of a loan s collateral decreases below the owed balance throughout the life of the loan 1conversely recourse debt allows the lender to pursue the borrower for any balance that remains after liquidating the collateral for this reason lenders charge higher interest rates on non recourse debt to compensate for the elevated risk 2recourse vs non recourse debtrecourse debt gives the creditor full autonomy to pursue the borrower for the total debt owed in the event of default both unsecured and secured personal loans can be recourse debts where the borrower assumes all risk and is personally liable after liquidating the collateral any balance that remains is known as a deficiency balance the lender may attempt to collect this balance by several means including filing a lawsuit and obtaining a deficiency judgment in court 