Cross collateralization cross default agreement is a legally written contract drafted between a lender and a borrower practicing cross default along with cross collateralization while taking a loan. The lenders normally practice this agreement in order to increase chances of security of their potential money provided as a loan.
This agreement is same as of cross collateralization agreement with an exception of a clause that states that if the debtor is defaulted in one loan then the other loans taken on same collateral are also in default by the lender. Such a bond indenture is also known as a cross acceleration.
The normal practices used for a defaulter are used then by the lender over all the loans for the debtor. Such an agreement is drafted by a legal advisor and then signed and notarized by a public notary to take the utmost precautions for the safety of both lender and debtor’s rights and to avoid any sort of cheat or ill will in future by any side.
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