recourse
Recourse is what a lender can legally chase you for when you fail to repay, whether that means your property, your guarantor, or your salary.
In plain English
When somebody lends you money, they are more than hoping you pay back. They are calmly working out what happens if you do not, and how far they can go to get their money.
That is the whole idea behind recourse. It is the legal path a lender can walk down when a borrower defaults, and how far that path stretches depends on the type of loan.
Say you take a car loan in Lagos and use the car itself as security. If you stop paying, the lender can repossess the car. But if selling that car does not cover the full debt, a loan with full recourse means they can still come after your other assets or your salary to recover the rest. A loan with limited or no recourse means their claim stops at the car, whatever the shortfall.
In the United Kingdom, this shows up clearly with mortgages. Most UK mortgages are full recourse, so if a house is repossessed and sold for less than what is owed, the bank can still pursue the borrower for the difference. This is why people are careful before they sign, because the property is not the only thing on the line.
For someone in the diaspora guaranteeing a loan for family back home, recourse matters even more. If the borrower defaults, the lender's recourse might extend straight to the guarantor, meaning that generous signature abroad could turn into a real bill later.
Adaeze borrows ₦3,000,000 for a car, using the car as collateral. She defaults, the lender repossesses and sells the car for ₦1,800,000. If the loan has full recourse, the lender can still pursue Adaeze for the remaining ₦1,200,000 through her salary or other assets.
Questions people ask
What is the difference between recourse and non recourse loans?
With a recourse loan, the lender can chase you beyond the collateral if it does not cover the debt. With a non recourse loan, their claim stops at the collateral itself, and they cannot pursue your other assets or income for the shortfall.
Are personal loans in Nigeria usually recourse loans?
Yes, most personal and unsecured loans from Nigerian banks are full recourse by default, meaning the lender can pursue your salary, other accounts, or legal action if you default, since there is no specific asset tied to the loan.
Can a guarantor be affected by recourse?
Absolutely. If a lender has recourse against a guarantor under the loan agreement, they can pursue that guarantor directly for repayment once the original borrower defaults, sometimes without exhausting every option against the borrower first.
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