Borrower / Guarantor Liability
Recourse – The borrower (or guarantor) is personally liable for the full amount of the loan, including any debt remaining after the collateral is foreclosed upon and sold. To satisfy the remaining debt, the lender can look to the individual assets of borrower (or guarantor).
Non-Recourse – The borrower (or guarantor) is not personally liable for any portion of the loan. The lender’s only recourse after a default is to foreclose on and sell the collateral.
Risk Allocation
Recourse – Higher risk for borrower (or guarantor) as personal assets beyond the collateral are at risk.
Non-Recourse – Higher risk for lender as lender is limited to the collateral as its only means of recovery.
Loan Terms
Recourse – In response to the lower risk, recourse loans usually offer more favorable and more flexible terms to borrowers as lenders have additional assets beyond the loan’s collateral for recovery.
Non-Recourse – In response to the higher risk, the terms of non-recourse loans are often more conservative as Lender’s recovery is limited to the collateral.