Recourse Loan

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Dictionary Says

Definition of 'Recourse Loan'


A type of loan that allows a lender to seek financial damages if the borrower fails to pay the liability, and if the value of the underlying asset is not enough to cover it. A recourse loan allows the lender to go after the debtor's assets that were not used as loan collateral in case of default.
Investopedia Says

Investopedia explains 'Recourse Loan'


Recourse loans give lenders a higher degree of power because they have fewer limits on what assets lenders can go after for loan repayment. For example, suppose that a homeowner takes out a recourse loan for $500,000 to purchase a home and then goes into foreclosure when the local housing market declines. If the value of the home is now only $400,000 and it was purchased with a recourse loan, the lending institution can target the borrower's other assets in order to make up for the outstanding $100,000.
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