Legal Definitions - nonrecourse note

A nonrecourse note is a type of promissory note that can only be satisfied by the collateral securing the note, not by the debtor's other assets. This means that if the borrower defaults on the loan, the lender can only go after the collateral and cannot pursue the borrower's other assets.

For example, if a borrower takes out a nonrecourse loan to purchase a property, and the property's value decreases, the lender cannot go after the borrower's other assets to recover the difference. The lender can only take possession of the property securing the loan.

Nonrecourse notes are often used in real estate transactions, where the property being purchased serves as collateral for the loan. They are also used in some types of business loans, where the assets being financed serve as collateral.