Non Recourse Debt
Full Video Transcript
If you're trying to get a loan, you should know you have a couple of options available depending on your current financial situation. There are basically two different types of loans available, and these are known as recourse and nonrecourse loans. When you apply for a nonrecourse loan, the lender will typically want to secure the loan against something you own, like a car or house, as collateral. If you stop making payments on the loan and default, the lender will be able to take over the collateral. Issues arise when the value of the loan is worth more than the collateral. For example, if your collateral was a car that is worth only $5,000, but the loan was for $10,000 in cash, the lender will want to sue you for the remaining $5,000 you borrowed. However, if the loan is nonrecourse, the lender will be prohibited from suing you for the remaining amount. Nonrecourse debt can also be available in situations where you want a cash advance on a potential settlement in a lawsuit. If you have any questions, speak with an experienced attorney in your area today.