Without Recourse

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DEFINITION

This phrase has several meanings. In a general sense, when the buyer of a promissory note or other negotiable instrument assumes the risk of default. Without recourse can also refer to a financing arrangement where the dealer's maximum possible liability is limited to warranties pertaining to the quality of an installment contract.

INVESTOPEDIA EXPLAINS

Another meaning of this term applies in the secondary market. In this case, the seller of loans or securities is no longer required to indemnify the investor for any losses suffered. Without recourse also applies to asset-based lending agreements where the lender is prohibited from charging back unpaid invoices caused by the debtor's inability to pay.


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