Non-Recourse Loan
Content
Definition
A Non-Recourse Loan is a loan where the lender`s only remedy in case of default is to seize the collateral securing the loan, without recourse to other assets of the borrower.
Usage and Context
Non-recourse loans are commonly used in real estate and project finance, where the lender`s recovery is limited to the value of the collateral.
Frequently asked questions
- How hard is it to get a non-recourse loan? Obtaining a non-recourse loan can be challenging due to stringent lending criteria, higher interest rates, and the requirement for high-quality collateral.
- What are the disadvantages of a non-recourse loan? Disadvantages include higher interest rates, stricter lending requirements, and limited availability compared to recourse loans.
- What is the difference between non-recourse and limited recourse financing? Non-recourse financing limits the lender`s recovery to the collateral alone, while limited recourse financing allows the lender to claim additional assets under specific conditions.
Benefits
Non-recourse loans protect the borrower`s other assets, provide financing for high-risk projects, and limit the borrower`s liability to the collateral.
Conclusion
Non-recourse loans offer a financing option that protects the borrower`s other assets, though they may come with higher costs and stricter lending criteria, making them more suitable for certain types of projects.
