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Recourse Loan vs. Nonrecourse Loan -- What's the Difference?

Let's compare the two types of debts -- recourse loans vs. nonrecourse loans.

[Updated: May 19, 2021 ] Dec 12, 2019 by Liz Brumer
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what is a nonrecourse loan

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Type of debt Pros Cons
Recourse Less stringent underwriting and loan approval requirements. Recourse loans may take lower credit scores, offer a lower interest rate, or higher debt to income (DTI) ratio. The borrower is held personally liable in the event of default. 
Nonrecourse More stringent underwriting loan approval requirements, which may require low debt to income (DTI) ratio, larger down payment, or higher credit score. May charge higher interest rates than a recourse loan. The borrower is not held personally liable in the event of default.