What does cross-collateralization allow credit unions to do?

Cross-collateralization is a practice that allows a lender, such as a credit union, to use an asset that has already been pledged as collateral for one loan to secure additional loans. This means that if a member has a loan secured by a specific property, the credit union can use that same property as collateral for a new loan. This process provides the credit union with additional security against the new loan, which can be beneficial for both the lender and the borrower, as it may allow the member to access more credit than they otherwise could without providing an additional asset.

This option highlights the fundamental nature of cross-collateralization—leveraging existing collateral to facilitate new borrowing—making it a practical and often utilized tool in consumer lending practices.