Nonrecourse Loan Law and Legal Definition

A nonrecourse loan is a secured loan that is secured by a pledge of collateral, usually real property for which the borrower is not personally liable. On default by the borrower, the creditor can recover by seizing only the collateral. If the property is insufficient to cover the outstanding debt the difference between the value of the collateral and the loan value becomes a loss for the creditor. Therefore, a non-recourse loan is usually granted limiting to 50% or 60% of the value of the property so that the property itself provides "overcollateralization" of the loan.