Cross collateralization involves using the same asset to secure multiple loans, which can help borrowers access more credit by leveraging their existing assets. However, this practice necessitates meticulous tracking, as each loan's performance can impact the others. Despite being a potentially burdensome for those institutions still tracking these collaterals manually, diligent monitoring is crucial to avoid over-leveraging and ensure that assets are not jeopardized. Effective tracking helps maintain financial stability and prevents unintended defaults, making the effort an essential part of managing cross-collateralized loans.

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