Without Recourse

AAA

DEFINITION of 'Without Recourse'

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 'Without Recourse'

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.

RELATED TERMS
  1. Non-Recourse Expense

    An accounting term that sometimes refers to the cost of absorbing ...
  2. Full Recourse Debt

    A guarantee that no matter what happens, the borrower will repay ...
  3. Non-Recourse Debt

    A type of loan that is secured by collateral, which is usually ...
  4. Limited Recourse Debt

    A debt in which the creditor has limited claims on the loan in ...
  5. Non-Recourse Finance

    A loan where the lending bank is only entitled to repayment from ...
  6. Tenured Capital

    Loans offered by the government to key business sectors.
RELATED FAQS
  1. Who are the key players in the bond market?

    The bond market can essentially be broken down into three main groups: issuers, underwriters and purchasers. The issuers ... Read Full Answer >>
  2. What is a debt/equity swap?

    Occasionally, a company will need to undergo some financial restructuring to better position itself for long term success. ... Read Full Answer >>
  3. Who bears the risk of bad debts in securitization?

    Bad debts arise when borrowers default on their loans. This is one of the primary risks associated with securitized assets, ... Read Full Answer >>
  4. What is the difference between a non-recourse loan and a recourse loan?

    The essential difference between a recourse and non-recourse loan has to do with which assets a lender can go after if a ... Read Full Answer >>
  5. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  6. What is a 'busted' convertible bond?

    In finance, a convertible bond represents a hybrid security that offers debt and equity features and risks. While a convertible ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    How Bond Market Pricing Works

    Learn the basic rules that govern how bond prices are determined.
  2. Trading Strategies

    Introduction to Types of Trading: Fundamental Traders

    Learn about the different traders and explore in detail the broader approach that focuses on company-specific events.
  3. Investing

    Debt Reckoning

    Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money!
  4. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  5. Mutual Funds & ETFs

    ETF Analysis: Vanguard Total Bond Market

    Learn about the Vanguard Total Bond Market exchange-traded fund, its primary portfolio holdings and risk/reward profile based on its past performance.
  6. Bonds & Fixed Income

    What are Floating-Rate Notes?

    A floating-rate note is a debt instrument with an interest rate that “floats,” or varies. They are also called floaters.
  7. Investing

    Five Portfolio Moves For The Second Half

    After a relatively calm few months, market volatility is back. If you are an investor, we help you prepare your portfolio with these five portfolio moves.
  8. Bonds & Fixed Income

    Junk Bonds: Does High Yield Equal Extreme Risk?

    High-yield bonds present a lot of risks but do they outweigh the rewards? Here are some ETFs to consider, with caution.
  9. Economics

    How An Aging World Can Impact Your Portfolio

    It can be easy for investors to lose sight of longer-term, structural developments in favor of more ephemeral trends and fads in the financial markets.
  10. Investing News

    Greece or China: Which is the Bigger Worry?

    A look at Greece, China and other economic concerns, as well as how to invest given the current environment.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!