Cross-collateralisation is the practice of using one security to support multiple loans, or multiple securities to support a single loan. In Australian private credit and commercial lending, the second form is more common: a single facility secured by two or more properties.
The structural advantage: the lender can underwrite at a portfolio level rather than security-by-security. A borrower with two properties, one at 50% LVR, one at 75%, might be unable to top up against the 75% security alone but can release capital cleanly when both properties are cross-collateralised at a combined 62.5% LVR.
The structural disadvantage: cross-collateralised loans are harder to unwind partially. If the borrower wants to sell one of the cross-securitised properties, the lender's consent is required (because reducing the security pool changes the credit position) and the loan may need to be partially repaid or restructured.
Single-asset security is simpler when the LVR and exit support it.