What Is a Recourse Loan? In recourse loans, the borrower is 100% personally liable for the loan amount. This could result in a lender repossessing or foreclosing the collateral stipulated in the loan agreement. If the lender cannot recoup the entire loan balance from the sale of the collateral, it may file a lawsuit and pursue the borrower’s other assets. Some common types of recourse loans include: ✔ Personal loans ✔ Credit cards ✔ Auto loans ✔ Short-term real estate loans. Recourse Loan Example: If a borrower takes out a $25,000 auto loan to purchase a $32,000 vehicle, the loan will be secured by the car. Should the borrower, after several payments, default on the loan with $20,000 remaining, the lender may repossess the vehicle and sell it to recoup the outstanding loan amount. However, let us suppose that the car has depreciated and can only be sold for $18,000. In such a case, the lender may also seek a judgment from a court and garnish the borrower’s wages to recover the remain
This blog is a helpful guide with tips on securing funding for your small business, with insights into how to approach investors and secure loans.