Which of the following is a pro of non-recourse loans?

Which of the following is a pro of non-recourse loans?

• A. unlimited personal liability
• B. limited personal liability
• C. no collateral required
• D. lower interest rates

Answer: (B)

Non-recourse loans are structured so the borrower's personal assets are protected beyond the pledged collateral. If the borrower defaults, the lender can seize and sell the collateral to recover the loan, but the borrower is not personally liable for any shortfall beyond what the collateral covers. That protection—limited personal liability—is the primary advantage. The loan is secured by the asset, so no collateral required is incorrect. Rates aren’t inherently lower because of non-recourse status and can reflect higher risk, so lower interest rates aren’t a guaranteed pro. Unlimited personal liability is the opposite of what non-recourse provides.

Non-recourse loans are structured so the borrower's personal assets are protected beyond the pledged collateral. If the borrower defaults, the lender can seize and sell the collateral to recover the loan, but the borrower is not personally liable for any shortfall beyond what the collateral covers. That protection—limited personal liability—is the primary advantage. The loan is secured by the asset, so no collateral required is incorrect. Rates aren’t inherently lower because of non-recourse status and can reflect higher risk, so lower interest rates aren’t a guaranteed pro. Unlimited personal liability is the opposite of what non-recourse provides.