A recourse loan means

A recourse loan means

• A. Lenders collect what is owed for debt even after they have taken collateral
• B. Lenders can only collect from the borrower if collateral is insufficient
• C. Lenders cannot pursue the borrower beyond collateral
• D. Lenders must obtain a court judgment to collect any amount

Answer: (A)

Recourse means the borrower is personally liable for the debt even after the lender takes the collateral. If the collateral doesn’t cover the full amount owed, the lender can pursue the borrower’s other assets or income to recover the remaining balance. This distinction matters because it means the lender isn’t limited to the collateral alone. For example, if a loan is $300,000 and the collateral sells for $250,000, a recourse loan allows the lender to seek the remaining $50,000 from the borrower personally. This contrasts with non-recourse loans, where the lender’s recovery is limited to the collateral and they cannot go after the borrower for any deficiency. The idea that a court judgment is always required for any amount isn’t what defines recourse; collection actions can occur through foreclosure or other legal steps, but the key feature is the borrower's personal liability for any shortfall after collateral sale.

Recourse means the borrower is personally liable for the debt even after the lender takes the collateral. If the collateral doesn’t cover the full amount owed, the lender can pursue the borrower’s other assets or income to recover the remaining balance. This distinction matters because it means the lender isn’t limited to the collateral alone. For example, if a loan is $300,000 and the collateral sells for $250,000, a recourse loan allows the lender to seek the remaining $50,000 from the borrower personally.

This contrasts with non-recourse loans, where the lender’s recovery is limited to the collateral and they cannot go after the borrower for any deficiency. The idea that a court judgment is always required for any amount isn’t what defines recourse; collection actions can occur through foreclosure or other legal steps, but the key feature is the borrower's personal liability for any shortfall after collateral sale.