Security Interest Vs. General Obligation
Some obligations are backed only by a security interest against specific designated property, and liability for repayment of the debt is limited to the property itself, with no further claim against the obligor. These are referred to as "nonrecourse obligations".
Other obligations (i.e., recourse obligations) are backed by the full credit of the borrower. If the borrower defaults, then the creditor can force the obligor into bankruptcy and the creditors will divide all assets of the obligor.
Depending on the relative credit of the obligor, the quality of the asset, and the availability of a structure to separate the obligations of the asset from the obligations of the obligor, the interest rate charged on one may be higher or lower than the other.
Read more about this topic: Security Interest
Famous quotes containing the words security, interest, general and/or obligation:
“The most disgusting cad in the world is the man who, on grounds of decorum and morality, avoids the game of love. He is one who puts his own ease and security above the most laudable of philanthropies.”
—H.L. (Henry Lewis)
“The slaves of power mind the cause they have to serve, because their own interest is concerned; but the friends of liberty always sacrifice their cause, which is only the cause of humanity, to their own spleen, vanity, and self-opinion.”
—William Hazlitt (1778–1830)
“The following general definition of an animal: a system of different organic molecules that have combined with one another, under the impulsion of a sensation similar to an obtuse and muffled sense of touch given to them by the creator of matter as a whole, until each one of them has found the most suitable position for its shape and comfort.”
—Denis Diderot (1713–1784)
“Such reproductions may not interest the reader; but after all, this is my autobiography, not his; he is under no obligation to read further in it; he was under none to begin.... A modest or inhibited autobiography is written without entertainment to the writer and read with distrust by the reader.”
—Neville Cardus (1889–1975)