nonrecourse loan

Nonrecourse loan

A loan for which no partner or related person bears the economic risk of loss. For example, if a partnership fails to repay a nonrecourse loan, the lender has no recourse against any partner except to foreclose of the assets used to secure the loan.

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nonrecourse loan

A loan in which the lender cannot claim more than the collateral as repayment in the event that payments on the loan are stopped. Thus, a group of investors may purchase an asset with a down payment and the proceeds from a nonrecourse loan. In the event that the investment turns sour, the investors are not apt to lose more than the down payment and payments already made on the loan. The unpaid balance on the loan will be absorbed by the lender. Compare recourse loan.

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nonrecourse loan

A loan that includes no personal liability for the borrower. The lender has agreed that the collateral is sufficient and,if there is a foreclosure and the property brings less than the amount due under the loan,then the lender will suffer the loss and not sue the borrower.Even nonrecourse loans typically have carve-outs imposing personal liability on the borrower if there are environmental problems or the borrower is guilty of some sort of fraud.