Buried deep down in the fine print on some loan agreements, you’ll find some “legalese” that allows a lender to turn a non-recourse loan into a recourse loan. This is why it’s important that you thoroughly read your loan paperwork or any other financial paperwork for that matter.
Recourse Loan vs Non-Recourse Loan
The main difference between a non-recourse loan vs. a recourse loan is that a recourse loan protects the lender, while the non-recourse loan protects you, the borrower.
A typical example of a recourse loan is a car loan. You agree to make monthly payments until the car is paid off. If you fail to make one or more payments, the lender can repossess the collateral on the loan (in this case, the car) and resell it. If the sale amount is less than what you still owe on the loan, the lender has the legal recourse to go after you for the rest.
This means they can take you to court, garnish your wages, or sue you, forcing you to liquidate your other assets to pay them back.
A common example of a non-recourse loan is a home mortgage loan. In this case, the collateral is your home. If you default on your loan, the lender can foreclose on your home and resell it. If the sale value is less than what you still owe on the loan, the lender takes a loss. They have no legal recourse to pursue you financially.
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When a Non-Recourse Loan Becomes a Recourse Loan
In some situations, a lender will insert language called a recourse carve-out guarantee. This happens most often with commercial real estate mortgage loans. With a recourse carve-out guarantee, the borrower becomes personally liable for the entirety of the loan amount if they violate the terms. This can also happen with personal mortgage loans.
A non-recourse loan can become a recourse loan in several situations, including:
- The misapplication of funds
- Obtaining a second mortgage
- Environmental issues
- Voluntarily filing for bankruptcy
Reading the fine print is so important. This is why it’s helpful to have a lawyer with you when you sign these types of financial agreements.
With HRF, the Terms of Your Financial Agreement Don’t Change
Our clients can depend on us. We NEVER change the terms of your pre-settlement legal funding. When you apply for and are approved for non-recourse legal funding with us, we spell everything out in the financial agreement that you and your lawyer sign. This agreement is legally binding, and there is nothing in the fine print that says we can change the terms.
What that means for you:
- NO monthly payments
- NO high-interest rates
- NO paying us back if you lose your case
- NO worries
Because your pre-settlement legal funding is based completely on your personal injury settlement and not your ability to make monthly loan payments, you are safe. This type of non-recourse loan is designed to protect you and your family from losing your home or having your wages garnished.
And even if you do need to declare bankruptcy, this would not affect the terms of your agreement. If you win your case, your lawyer pays us back directly out of your settlement or jury award. If you lose your case, you don’t pay us a penny. It really is that simple.
You Can Apply for More Legal Funding
In the event your personal injury case drags on for longer than we foresaw, you may be eligible to apply for more legal funding. It all depends on the specifics of your case and the predicted size of your settlement.
Our team is flexible, and if you have run out of the first round of cash from your non-recourse legal funding, we may be able to work with you and your lawyer for a second round of funds to help you meet your financial obligations.
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Apply Now for Pre-Settlement Legal Funding
Applying for pre-settlement funding is free and risk-free. As long as you are involved in an active personal injury case and you have a lawyer representing you, you are eligible to apply.
Just fill out the form on the Apply Now page, and our team will be in contact with you and your lawyer. Generally, we can let you know if you’ve been approved the same day. Once you and your lawyer sign the paperwork, we can have the cash in your account within 24-48 hours.
If you need assistance or have questions, please call us at (866) 407-6404.