The Benefits of Using Non-Recourse Financing
When you need to obtain a loan, there are many means by which you can pursue to get that loan. Sometimes, simply going to a bank and trying to get a loan is not going to work. Therefore, you need to get creative. There are other methods of getting financing, and one variation is non recourse financing.
This type of financing basically works by providing some kind of collateral to the lender. Most of the time, this collateral is real estate. A majority of the institutions that will accept this method of financing include commercial mortgage-backed securities, life insurance organizations and commercial banks. Regardless of the organization, you can only pay back the loan with money obtained through the initial funding. The institution cannot take additional assets in order to get its money back.
The primary benefit of this type of financing is that you are not obligated to pay back the remaining balance even if the initial asset has been seized. This is in contrast to another method of financing referred to as recourse financing. With recourse financing, you still need to pay the institution money even after they have seized the asset you have put up for collateral. This causes many people to go into debt. However, with non recourse financing, the bank can still seize whatever it was you put up for collateral, but you do not have to pay anything beyond that. This means that even if you have an outstanding debt to pay, you are under no obligation to pay it.
The reason why this amazing benefit is in place is the fact that regulations have been passed in order to protect the debtor. Something to bear in mind is the fact that a lot of banks only offer recourse financing. The reasoning is fairly obvious. Banks take on more risk with the other variation, and recourse financing is generally viewed as the safer bet even if the individual fails to pay back the loan. However, there are plenty of institutions that will provide you with non recourse real estate financing. You just need to go out and look for them.
If you are willing to put up any property you own or other valuable possessions up for collateral, then non recourse financing can be a viable way for you to obtain a loan. Speak with a professional about what loans you qualify for. You may be surprised to learn how much you can obtain.