What's a non-recourse loan?

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  • Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    5y

    Investopedia definition: "Non-recourse debt is a type of loan secured by collateral, which is usually 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".

    [Which therefore means: a Recourse Loan does allow the Lender to come after other of your Assets if your original collateral doesn't cover your defaulted amount].

    ie.  All else being equal, you prefer a non-recourse Loan, but, why would you be defaulting in such a manner that caused your original collateral not to be sufficient?  Cheers...

  • Investor · Cherry Hill, NJ · Member since 2016 · 860 posts · 324 votes
    5y

    @Brent Coombs

    Also, recourse debt counts towards your dti and reported on your tax return, where non recourse does not. Having non recourse debt also helps on obtaining further loans because of this

    This is my understanding

  • Rental Property Investor · Member since 2017 · 75 posts · 19 votes
    5y

    Cool.  No intention of defaulting.  So that was curiosity.  Thanks for the info!

    @Mayer M why wouldn't you report a non recourse loan on Taxes as the interest is still a write off?

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