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What are Cross-Collateralized Loans?

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Cross-collateralized loans allow borrowers using collateral of one loan to secure another loan. On the surface, it seems to be a great option. Still, the borrower doesn’t realize how high is a level of control over the car the lender receives.

Cross-collateral loan mortgage is also a popular decision among borrowers that own multiple properties. They are reasonable when it comes to construction loans – loans that finance a building of a home or other real estate projects. For instance, the person that already has several properties applies for the next mortgage. In order to secure himself, a borrower places a lien against the properties. In this case, he receives a senior lien over the properties. It makes the management of the property (transfer/selling) more difficult.

Typically, credit unions deal with a cross-collateralization home loan. Therefore, when you look for this kind of financing, you should check out offers from credit unions beforehand. They have more or less affordable loan conditions. As they specialize in this type of lending, they make loan repayment process more convenient and fast.