What characterizes a recourse loan?

A recourse loan is characterized by the lender's right to pursue the borrower personally in the event of a default on the loan. This means that if the borrower fails to meet the repayment terms, the lender may not only seek to recover the property used as collateral for the loan but can also pursue the borrower's other assets or income to recover any outstanding debt. This feature of recourse loans provides additional security to lenders because it reduces their risk by allowing them to go after the borrower's overall financial resources beyond just the collateral.

In contrast, a loan that allows the lender to pursue only the property is known as a non-recourse loan, which limits the lender's recovery options. A loan that requires no collateral would refer to an unsecured loan, which does not provide the lender with the rights associated with recourse loans. Lastly, loans that are guaranteed by a government agency, such as FHA or VA loans, may have specific protections or guarantees, but this characteristic does not inherently define a recourse loan. Instead, the defining factor of a recourse loan is its provision for the lender to seek personal recourse against the borrower.