Recourse Loan
A loan where the lender can pursue the borrower's other assets if collateral is insufficient to repay the debt.
What is Recourse Loan?
A recourse loan is a secured loan in which the lender retains the right to pursue the borrower's personal assets beyond the pledged collateral if the collateral's value is insufficient to fully repay the outstanding loan balance after default. If a borrower defaults and the collateral is sold at a deficiency—a price below the remaining loan balance—the lender can seek a deficiency judgment in court and garnish wages, levy bank accounts, or seize other assets to recover the shortfall. Most mortgages in the United States are recourse loans at the federal level, though many states have enacted anti-deficiency statutes that limit recourse for purchase-money mortgages on owner-occupied homes. In contrast, non-recourse loans limit the lender's recovery to the pledged collateral only, offering greater protection to borrowers.
Example
A borrower defaults on a $300,000 recourse mortgage. The lender forecloses and sells the property for $250,000, leaving a $50,000 deficiency. In a recourse state, the lender obtains a deficiency judgment and garnishes the borrower's wages to recover the remaining $50,000 plus collection costs.
Source: Investopedia — Recourse Loan