Cross Collateralization

AAA

DEFINITION of 'Cross Collateralization'

The act of using an asset that is currently being used as collateral for a loan is also used as collateral for a second loan. If the debtor was unable make either loan's scheduled repayments in time, the affected lender(s) can eventually force the liquidation of the asset and use the proceeds for repayment.

INVESTOPEDIA EXPLAINS 'Cross Collateralization'

Technically, taking out a second mortgage on a property is considered to be cross collateralization. In such a case, the property is originally used as collateral for the mortgage. The second mortgage is then tapping into the equity that the property's owner has accrued for collateral.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  3. Home Equity

    The value of ownership built up in a home or property that represents ...
  4. Collateralization

    The act where a borrower pledges an asset as recourse to the ...
  5. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  6. Default Risk

    The event in which companies or individuals will be unable to ...
Related Articles
  1. Understanding Your Mortgage
    Personal Finance

    Understanding Your Mortgage

  2. Home-Equity Loans: The Costs
    Options & Futures

    Home-Equity Loans: The Costs

  3. Equity Stripping Leaves Creditors Empty-Handed
    Home & Auto

    Equity Stripping Leaves Creditors Empty-Handed

  4. Finding And Investing In FHA Condos
    Investing Basics

    Finding And Investing In FHA Condos

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center