Cross Collateralisation or Stand Alone?
Cross Collateralisation is a term used when the collateral for one loan is also used as collateral for another loan. If a person has borrowed from the same bank a home loan secured by the house, a car loan secured by the car, and so on, these assets can be used as cross-collaterals for all the loans. Another term is “co-secured” meaning the same thing as in multiple security (i.e. residential property for example) simultaneously providing security for one or more loans.
This article attempts to explain the difference between structuring your property portfolio as “Cross Collateralised” or “Stand Alone” with regards to borrowing and shedding some light on best practises and why.
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