• James D. Lynch

The Difference Between "Recourse" and "Non-Recourse" Loans

When borrowing money, the loan may be either recourse or non-recourse. In both cases, if the borrower doesn't repay the loan, the lender can seize the collateral (i.e. the asset that secures the loan, which is usually the asset that was purchased with the money from the loan). What if the collateral is not enough to fully repay the lender? This is where the distinction between recourse and non-recourse becomes important.

A recourse loan holds the borrower personally liable. If the collateral is not enough to fully repay the lender, the lender can also go after other personal assets of the borrower. For example, if the borrower defaults on a recourse mortgage, the lender can seize and sell the collateral (i.e. the house), and the lender can also go after the borrower's other assets or sue to have the borrower's wages garnished until the lender collects the entire amount owed.

A non-recourse loan does not allow the lender to pursue anything other than the collateral. So if the borrower defaults on a non-recourse mortgage, the lender can only seize and sell the house. If the house does not sell for at least the amount the borrower owes, the lender is out of luck. The lender cannot take any further legal action to collect the money owed.

  • LinkedIn Social Icon
  • Facebook Social Icon
  • Twitter Social Icon
  • alignable_square
  • Yelp Social Icon
  • avvo
  • Justia-Icon
  • lawyer_com favicon
  • taxbuzz
  • ptin-seal
  • 170927-usnsquarelogo-design
  • favicon-32x32
  • mail icon

Law Office of James D. Lynch, PLLC

3000 Joe Dimaggio Blvd #90, Round Rock, TX 78665


(512) 745-6347 (Austin / Round Rock)

‪(210) 201-6317‬ (San Antonio)

(714) 745-3875 (Los Angeles / Orange County)

©2020 by Law Office of James D. Lynch, PLLC. The information contained in this website is for informational purposes and is not to be considered legal advice.  Any correspondence between you and the Law Office of James D. Lynch is not intended to create an attorney-client relationship.  Please do not send confidential information to us until after an attorney-client relationship has been established by an engagement letter signed by the proposed client and our attorney.