Some lenders will allow a borrower to secure a loan through a non-recourse debt pledge. This entails the lender pledging a form of collateral, i.e. real estate or property, for which the borrower is not personally liable.
Non-recourse debt (loan) can be considered a high-risk loan for lenders. If a borrower defaults, the lender can then seize the collateral.
The legal proceedings of both recourse and the non-recourse loan will be different in each state.
The Internal Revenue Service differentiates between two categories of loans, recourse and non-recourse loans:
Borrowers will undergo a non-recourse loan or debt to help secure their finances. This form of debt offers no personal liability to any of their assets, or to which they have offered as collateral.
This enables borrowers to have better security over their wages, and personal liability. As no legal action can be taken by the lender if a borrower defaults. Lenders do have the right to obtain the agreed collateral such as property or real estate to repay the loan.
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