When a lending institution loans money they mostly fear nonpayment of the debt. Often these loans were implemented due to a third party’s endorsement. To qualify the endorsement the bank may require the third party guarantee the debt. This is known as having ‘Recourse’ in getting the debt paid
Recourse and Nonrecourse Types of Loans
Recourse and nonrecourse types of loans exist with almost every loan issued. In most cases, loans allow for recourse to the lender, i.e. the ability to collect from a third party in case of default or slow payment. It is rare to see a nonrecourse loan in the market.