Pros and Cons of Non-Recourse Loans
When considering a loan, there are many factors to take into account. One of the key decisions you’ll need to make is whether you want a recourse or a non-recourse loan. Both types of loans have their pros and cons, so it’s important to carefully weigh your options before making a decision.
As South Dakota’s foremost non-recourse loan lending bank, First Western Federal Savings Bank has a few key points to share about non-recourse loans and what they mean for you.
What Is A Non-recourse Loan?
Let’s start with the basics: what is a non-recourse loan? Simply put, it’s a loan that is secured by collateral (usually a property) and where the borrower is not personally liable for any deficiency that may arise if the property is sold for less than the loan balance. In other words, if you default on the loan, the lender can only go after the collateral and cannot come after you personally to collect any remaining debt.
Protecting The Borrower And Their Interests
One of the main advantages of a non-recourse loan is that it provides a greater level of protection for the borrower. If the property value drops or the market takes a downturn, the borrower can walk away from the loan without the fear of personal liability. This can be especially beneficial for commercial real estate investors who are taking on significant debt to acquire properties.
How Non-recourse Loans Differ From Recourse Loans
Non-recourse loans typically have higher interest rates and more stringent lending criteria than recourse loans. Lenders are taking on more risk with a non-recourse loan, so they require a higher level of collateral and creditworthiness from the borrower.
Availability Of Non-recourse Loans
It’s also worth noting that non-recourse loans are not available for all types of lending. They are most commonly used in commercial real estate and equipment financing and are generally not available for personal loans or small business loans.
The Lender You Work With
If you’re considering a non-recourse loan, it’s important to work with a lender who is experienced in this type of lending. Look for a lender who has a strong track record of success and who can provide you with clear and transparent terms. First Western Federal Savings Bank is a Top-rated National loan lender and works to give you honest and complete information. We want to help you with your IRA loan and make sure that you get the most value out of it.
So, should you consider a non-recourse loan? Ultimately, it depends on your individual circumstances and risk tolerance. If you’re investing in commercial real estate and want to limit your personal liability, a non-recourse loan could be a good option.
Call First Western Federal Savings Bank at (800) 908-8845 to get started!
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