Recourse Loan
Also known as: full recourse loan, recourse debt
A recourse loan gives the lender the legal right to pursue additional remedies against the borrower if the collateral is insufficient to repay the debt. For unsecured personal loans, all loans are recourse: the lender can sue for unpaid balances, obtain judgments, and pursue wage garnishment or bank levies.
Full definition
The recourse vs. non-recourse distinction matters most in secured lending (mortgages, auto loans, business loans) where collateral is pledged. In personal loan contexts, understanding recourse helps borrowers understand what happens if they default. Recourse lending: The lender retains the right to pursue the borrower personally for any deficiency. If a secured lender repossesses and sells collateral that does not cover the full balance, they can sue for the remainder. If an unsecured creditor is never repaid, they can sue, win a judgment, and then use post-judgment collection tools like wage garnishment, bank account levies, or property liens. Non-recourse lending: Common in commercial real estate and some state mortgage laws. If a borrower defaults, the lender's only remedy is to seize and sell the collateral. They cannot pursue the borrower personally for any remaining balance. Some states (California, Texas, and others) have anti-deficiency statutes that make certain residential mortgages effectively non-recourse. Personal loans are always recourse: Because personal loans are unsecured (no collateral), there is no 'collateral only' limitation. If you default, the lender can sue. If they obtain a judgment, they can pursue wage garnishment, bank levies, and in some states, property liens on real estate you own. Strategic implications of default: Some borrowers mistakenly believe that defaulting on a personal loan results in no consequences beyond a credit score hit. In reality, a judgment can follow a borrower for years, can be renewed, can accrue post-judgment interest, and can be collected through increasingly aggressive methods. Bankruptcy discharge: The most complete protection against recourse collection of unsecured debt is a bankruptcy discharge. Chapter 7 discharges most unsecured personal loan debt; Chapter 13 allows repayment over 3-5 years. Post-discharge, the recourse right is permanently extinguished for discharged debts.
- Written by
- Get Advance Loan Editorial Team
- Reviewed by
- Compliance Review
- Published
- January 15, 2026
- Last reviewed
- June 15, 2026
- APR (Annual Percentage Rate)APR is the yearly cost of borrowing, expressed as a percentage of the loan amount. It includes interest plus most lender fees, so it's a more complete measure of cost than the interest rate alone.
- Interest rateThe interest rate is the percentage of the loan balance charged per year as interest, excluding fees. It is a component of, but smaller than, the APR.
- Fixed interest rateA fixed rate stays the same for the entire life of the loan, so the monthly payment never changes. Most U.S. personal loans are fixed-rate.
- Variable interest rateA variable rate can change over the life of the loan, usually tied to an index like the prime rate. Monthly payment can rise or fall.
- Prime rateThe prime rate is the benchmark interest rate U.S. banks publish for their most creditworthy commercial customers. Many consumer rates are quoted as prime + a margin.
- Loan termThe loan term is how long you have to repay the loan, usually expressed in months. Common personal-loan terms are 24, 36, 48, 60, and 72 months.
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