You know how your credit card company can increase your interest rate and you can’t do anything about it? Or how they can change the terms of your financial agreement on a whim? The same goes for certain loans, only the financial outcome is more impactful than a higher interest rate or a few more dollars a month.
In certain loan agreements, there may be something in the legal fine print that allows a lender to change the terms of the loan, thereby turning a non-recourse loan into a recourse loan.
In This Article
Different Types of Loans
In a nutshell, a recourse loan protects the bank or other lender while a non-recourse loan protects you, the borrower.
With a recourse loan, if you default on the loan the lender can repossess the collateral, such as your car or boat. They can then sell your asset(s) and further, sue you in court for the difference if the sale does not satisfy the amount that remains on the loan. The lender can even ask the court to garnish your wages until you pay them back in full.
By contrast, with a non-recourse loan, you are more protected if you default on the loan. In this situation, your home is the only collateral. If you can’t make the mortgage payments, the bank or mortgage company can still foreclose on your home to recoup some of what you owe, yes. But the difference is, if they can’t fulfill the loan with the sale, the lender has to take the loss. They do not have the recourse to go after you further.
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How a Non-Recourse Loan Becomes a Recourse Loan
The terms of a non-recourse loan are spelled out in the loan agreement in the fine print. In some loan agreements. the lender will insert what are known as recourse carve-out guarantees. This wording is designed to protect the lender in the event the borrower cannot pay them back due to certain circumstances.
These guarantees used to be called “bad boy” guarantees because they allow a non-recourse loan to become a recourse loan if the borrower committed a “bad act.” This language appears most often in commercial real estate loans. Under any of these circumstances, the borrower becomes personally liable for the full amount of the loan amount if they commit a “bad act.” However, this can also happen with a personal mortgage loan.
These “bad acts” include, but are not limited to:
- The misapplication of funds
- Certain environmental issues
- Voluntarily filing for bankruptcy
Before signing such a loan agreement, beware. The lender may insert other conditions you need to be aware of, such as situations involving obtaining a second mortgage on the property. Make sure you read the fine print in any legal or financial agreement before you sign. It’s also a good idea to have a lawyer review these agreements with you.
Your High Rise Financial Non-Recourse Loan Will Stay that Way
You can count on High Rise Financial to provide risk-free non-recourse legal funding. We never insert carve-out language that would allow us to change the terms of the loan in the future. There are no restrictions regarding how you spend the money, and we do our due diligence before we assume the risk of approving you when your case has not yet settled.
Your non-recourse legal funding means:
- NO monthly payments
- NO compound interest
- NO payment required if you lose your case
- NO change in the terms of the agreement, no matter what
We have designed our pre-settlement legal funding to help our clients make ends meet while they wait for their personal injury cases to settle. You are protected in the event you lose your case and can’t pay us back because the funds you receive are in the form of a non-recourse loan. This is a risk-free financial solution for personal injury plaintiffs.
You May Be Able to Apply for Additional Legal Funding
Personal injury cases can sometimes drag on for years. If you have already received pre-settlement legal funding and yet find yourself in additional financial trouble before your case resolves, you may be able to apply for additional funding. Availability depends on your individual circumstances and case specifics.
If this is your situation, please let us know. We will work with you and your lawyer to see if we can lend you additional funding to help you pay your bills.
Complete a Free Application form now
Applying for Pre-Settlement Legal Funding Is Free
Applying for pre-settlement legal funding requires no application fee, and you are protected throughout the process. As long as you have filed a personal injury claim and are represented by an attorney, you meet the requirements to apply.
Get started by filling out the form on our Apply Now page. Once we receive your information, our team will consult with your lawyer to determine how much we can provide to you in a non-recourse loan. In most cases, we can give you a decision that same day. After you and your lawyer review the agreement and sign it, we can usually transfer the funds to your account within 24-48 hours.
If you need help or have questions, please call our office at (866) 407-6404.