Benefits of Non-Recourse Loan

Non-recourse debt is a secured debt with a pledge of a collateral security, a real property. If the borrower defaults, the lender will seize the property in case of default and can recover his loan amount by selling the property, but the lenders recovery is limited to the collateral. The non-recourse debt is used typically for high end investments like big capital expenditure in real estate having long loan periods.
There is yet another type of non-recourse funding available, where the cash is given to plaintiffs involved in the lawsuit. The cash advance is given based on the settlement amount and is based on the percentage of that amount. This amount given is non-recourse, if the case is lost, you do not owe anything to the lawsuit company. Non-recourse debt is always shown as a liability in the balance sheet while the collateral is shown as an asset. There are tax benefits also when the property is disposed of in regard to the non-recourse debt. The taxable gain generally arises when the sale consideration exceeds the amount of taxpayers’  adjusted basis in the property. The adjusted basis is sum of the following, the amount of original cost incurred by the taxpayer when the property was acquired, plus the cost of improvement made by the taxpayer less the amount of depreciation or deduction allowed on the property.
The main benefit in non-recourse debt is that the crediting companies are provided with security only up to collateral value. So we can say that non-recourse loan means a secured loan contract, in which collateral is the final repayment source. So good news for you is that in case of default you cannot be hold personally responsible for it, and the creditor can sell out the collateral property and realise his money. The non-recourse loan should be taken after proper planning and after considering all risks in the deal. From the point of view of lender it is quite risky to lend a non-recourse debt as the amount involved in this type of lending is very big like capital cost inconstant revenue flows and also the loan term is very long. So the lender will take every aspect of borrower and analyse the things seriously into consideration and he will only take real asset only as collateral.
Also you should have severe knowledge regarding underlying principles, rules, probability laws and financial models. So never regret if the long time is spend while planning and analysing the things. Due to such riskiness on the part of the lender, they will lend up to 80%-90% loan to value in order to reduce the risk. In this way the value of collateral is over exaggerated. The interest rates are also high compared to other loan types the reason is the credit check is excused. They are therefore known as loans no credit check.
So in overall aspects the non-recourse loan is good for borrower as the lender could not ask for anything to recover his debt except the collateral given to him. Also it is very difficult for the lender to take legal proceedings in court. However to be on safe side you should read the agreement before signing it.