A big difference between credit unions and other banks is that credit unions usually consider any secured loan, such as a vehicle loan, to be “cross-collateralized” by all other debt you have with the credit union.
Cross-collateralization is a term used when the property that is used as security for one loan is also used as security (or collateral) for another loan or loans. Generally the credit union adds, in small print, to the vehicle loan documents a clause such as…”the security used for this loan will also act as security for all other loans with the credit union, now or in the future”.
So if you have a secured car loan with a credit union, the car acts as security for ALL loans that you may have at that credit union. In other words, your credit cards, overdraft line of credit, and any other personal loans with the credit union are secured by the car. If you stop paying on the other loans, and only pay on the car loan, the credit union will often repossess the car.
See Bankruptcy and Credit Unions: Part 3 – Your options in a Chapter 7
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