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Simple English definitions for legal terms
pledged account
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A quick definition of pledged account:
A pledged account is when someone deposits something valuable, like money or property, with another person as a promise to pay back a debt or fulfill an obligation. The person who receives the pledge is called the pledgee.
A more thorough explanation:
Definition: A pledged account is an account that has been used as collateral for a loan or other financial obligation. The account holder has pledged the account as security for the loan, and the lender has the right to seize the funds in the account if the borrower fails to repay the loan.
Example: John wants to borrow $10,000 from the bank to start a business. He doesn't have any assets to use as collateral, so he decides to pledge his savings account as security for the loan. The bank agrees to lend him the money, but only if he pledges his account.
Explanation: In this example, John's savings account is a pledged account because he has used it as collateral for the loan. If he fails to repay the loan, the bank can seize the funds in his account to recover the money it lent him. This is a common practice in lending, as it provides the lender with a way to recover its money if the borrower defaults on the loan.