Cross-collateralization
Encyclopedia
Cross-collateralization is a term used when the collateral
Collateral (finance)
In lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan.The collateral serves as protection for a lender against a borrower's default - that is, any borrower failing to pay the principal and interest under the terms of a loan obligation...

 for one loan
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....

 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. If the person pays off the car loan and wants to sell the car, the bank may veto the deal because the car is still used to secure the home loan and other loans. Technically, cross-collateralization expires when the borrower has no outstanding loans with the bank.
In the context of bankruptcy, cross-collateralization also means the collateralization of general unsecured prepetition debt by collateral securing postpetition loans.

Another example of cross-collateralization is when an individual may have a checking account and a loan at the same bank. If the individual becomes past due on the loan, the financial institution may take money out of the bank account or freeze the account until the loan becomes current.

Royalty advances
Advance against royalties
In the field of intellectual property licensing, an advance against royalties is a payment made by the licensee to the licensor at the start of the period of licensing which is to be offset against future royalty payments.For example, a book's author may sell a license to a publisher in return for...

paid by a publisher to authors of multiple books or to creators of multiple video games are often cross-collateralized; in book publishing this is sometimes called "basketing". In this scheme, the publisher pays no royalty checks to the creator until all of the books (or video games, or other works of authorship) have "earned out" their advances.
The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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