Non-Recourse Loan In a non-recourse loan or mortgage, however,...

Non-Recourse Loan In a non-recourse loan or mortgage, however, the lender is out of luck. If, after selling the asset collateralized with the loan, there is still a balance due, the lender has to take the loss. He has no claim on the borrower's other funds, possessions, or funding sources. Many traditional mortgages are non-recourse loans, using only the home itself as collateral.Not surprisingly, as a matter of principle, borrowers almost always favor non-recourse loans, while lenders almost always favor recourse loans. While potential borrowers might find it attractive to hold out for non-recourse loans, it is important to remember that they come with higher interest rates and are reserved for individuals and businesses with the best credit.Additionally, failure to pay off a non-recourse debt may leave a borrower's other assets untouched, but the default is still on record, with all that implies for the borrower's credit score—which is not a positive one.