where non recourse loans are used
compare a non recourse loan with the more conventional loan in which the borrower must begin repaying immediately and in installments every month thereafter not surprisingly interest rates are generally higher on non recourse loans to compensate for the elevated risk substantial collateral is also required non recourse loans are often used to finance commercial real estate ventures and other projects that involve a long lead time to completion in the case of real estate the land provides the collateral for the loan they also are used in the financial industry with securities used as collateral special considerations for non recourse loansnon recourse loans and recourse loans are subject to different tax treatments in the u s non recourse loans are considered to be paid in full once the underlying asset is seized regardless of the price at which the asset is sold in the case of recourse debt if the financial institution forgives any part of the debt after the associated asset is seized and sold the forgiven amount may be treated as ordinary income that the debtor must report to the internal revenue service 