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Home / Finance / Personal Loan / What is a non recourse loan ?
Q.

What is a non recourse loan ?

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0 2022-06-27T20:50:38+00:00

Hey pal,

It is important to know the terms and conditions of non recourse loan. Knowledge about the interest rate and loan tenure is not enough. You should be completely aware of the risk you are taking while availing of a loan. We spend our lives trying to build an investment for us, the type of loan you pick can massively impact the future of the investment. 

Check out NoBroker Home Loan services to get a loan against your dream house.  What is a non recourse loan?

It is a loan that is given by the lender when an asset is used as collateral. In case the borrower is unable to repay the loan amount aka he defaults, the borrower can seize the property put as collateral. The lender will not be able to seek further compensation 

Non recourse loan example :

If a borrower defaults on the loan payment, the bank/ lender will not be able to seize any other asset other than the initial collateral. This will stand true even if the value of the collateral does not cover the default amount. The borrower will not have any personal liability for the loan. 

This loan type is extremely risky for the lender as the resale value of the collateral can plummet below the loan balance. Usually, the interest rate for these loans is quite high. This is done to compensate for the elevated risk.

The major characteristics of non recourse loan are high capital expenditures, long loan periods, and uncertain revenue streams.

I hope your doubts have been solved.

Looking for property to invest? Check out NoBroker to get leads without paying brokerage. Read more :

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