When Can a Non-Recourse Loan Become a Recourse Loan?
Non-recourse loans should be low-risk for the person borrowing money. But there are situations where a non-recourse loan can become a recourse loan. Let’s look at what this means and how you can avoid it.
At Silver Dollar Financial, our pre-settlement funding is non-recourse because you don’t pay us back if you don’t win a settlement. You can rest easy knowing your funds are risk-free. To apply today, click Apply Now above or call us at (844) 871-0628.
Non-Recourse Versus Recourse Loans
A loan can be either recourse or non-recourse. To understand the difference, let’s first talk about collateral.
Collateral is something you give a lender as security for a loan. Collateral could be credit cards, homes, cars, or something else you have. (With a pre-settlement loan, your pending settlement acts as collateral. Thankfully, there is no risk—more on that below.)
Here’s how recourse and non-recourse loans differ according to the Internal Revenue Service (IRS):
- With a recourse loan, the borrower is personally liable. If the borrower cannot pay back the loan, the lender can take a lot. First, they’ll take the collateral. But then the lender can take the owed money from the borrower’s accounts or wages.
- With a non-recourse loan, the lender cannot take anything more than the collateral. After taking the collateral, the lender has no right to collect the owed money or other assets.
Non-recourse loans are much better for the borrower. However, there are certain situations where a non-recourse loan might become recourse. This often happens when a contract’s wording is vague.
How Non-Recourse Loans Switch to Recourse Loans
A few recent court cases show how non-recourse loans can become recourse. These situations involve real estate loans where the borrower cannot repay the debt.
The case of Wells Fargo Bank, N.A. v. Cherryland Mall Limited Partnership from 2011, is a good example. The loan documents showed that the loan would be non-recourse unless the borrower broke specific requirements. For instance, Cherryland Mall had to have enough money to pay its debts on time.
Cherryland Mall failed to pay back the loan. The lender, Wells Fargo, took the mall property and sold it. But Well Fargo had a loss of over $2 million after selling. Because of wording in the loan documents, Wells Fargo said the mall violated terms and was liable for the loss.
Warning Signs of Non-Recourse Loans Going Bad
When someone gets a property loan, non-recourse loans can become recourse loans in some circumstances. It depends on the carve-out guarantee.
Carve-out guarantees are standard for non-recourse commercial loans. They allow the lender to go after the borrower’s assets if they foreclose on the property.
Borrowers of property loans should read the carve-out guarantee carefully. Warning signs include language requiring the borrower to:
- Remain solvent and have enough capital to operate the business.
- Be personally liable for unpaid real estate taxes.
- Be personally responsible for due insurance premiums.
A loan document might also say that the loan can become recourse if the borrower:
- Admits in writing that they can’t pay their debts as they’re due.
- Files voluntary bankruptcy.
- Files involuntary bankruptcy and doesn’t dismiss within 45 days.
A loan is not actually non-recourse if the conditions contain similar language. If you are seeking a real estate loan, keep the above in mind. If you’re unsure, speak with an attorney to make sure the agreement is fair.
Our Pre-Settlement Loans Are Always Non-Recourse
Thankfully, at Silver Dollar Financial, you do not have to worry about any surprises. Our pre-settlement funding is always non-recourse and risk-free to you.
We provide legal funding if you are waiting for your personal injury settlement. We know that many injury victims need money now to cover their medical bills, living costs, and more. We can provide up to $100,000 from your pending settlement amount.
Here’s how it works:
- We get some basic information about you and your needs. Our application process is quick, simple, and free.
- We review your application. We contact you or your attorney if we need more information.
- If you qualify, we send you the money. You can use this money as needed for your costs.
- You pay us back with your settlement. The funds come straight from your compensation, and you keep the rest.
- No compensation, no worries. If you don’t end up winning your case, you don’t have to pay us back anything.
Our pre-settlement funding is not like a traditional loan. You are borrowing forward from yourself. Our funding is a portion of your settlement that’s on the way. We take away some of the stress by providing the money you need now.
If you can’t pay us back because you don’t win a settlement, you’re off the hook. We cannot and will not take anything from you. We take the loss. Our funding always acts as a non-recourse and risk-free loan to yourself.
How to Apply for a Non-Recourse Settlement Loan
Silver Dollar Financial uses a quick and straightforward process. We know many personal injury costs can’t wait. After submitting your application, you could have your money within 24 hours.
Here’s how our process goes.
You Apply Online
The first step is the only time we’ll need any effort from you. Click the Apply Now button above to get started. We’ll ask for some necessary information like:
- Phone number
- Home state
- Attorney’s name
- Attorney’s contact information
- How much you need
If we need anything else from you, we’ll reach out right away.
We Approve You
Our team will look over what you’ve sent and determine if you qualify. We often decide in as little as 24 hours.
You Get Your Money
We send the money right to your bank account. It’s yours to use on whatever costs you have.
Apply for Your Non-Recourse Pre-Settlement Loan Today
To get started today, click Apply Now above or call us at (844) 871-0628. There is no risk to you. You don’t pay us back unless you win your settlement.
To learn more or start your application, click Apply Now or call (844) 871-0628 today.