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Simple English definitions for legal terms
nonrecourse note
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A quick definition of nonrecourse note:
A nonrecourse note is a type of written promise to pay money that can only be paid back using the collateral that secures the note, not the borrower's other assets. This means that if the borrower defaults on the loan, the lender can only take the collateral and cannot go after the borrower's other possessions. It is different from a recourse note, which allows the lender to go after the borrower's other assets if the collateral is not enough to cover the debt.A more thorough explanation:
A nonrecourse note is a type of promissory note that can only be satisfied by the collateral securing the note, not by the debtor's other assets. This means that if the borrower defaults on the loan, the lender can only go after the collateral and cannot pursue the borrower's other assets.
For example, if a borrower takes out a nonrecourse loan to purchase a property, and the property's value decreases, the lender cannot go after the borrower's other assets to recover the difference. The lender can only take possession of the property securing the loan.
Nonrecourse notes are often used in real estate transactions, where the property being purchased serves as collateral for the loan. They are also used in some types of business loans, where the assets being financed serve as collateral.