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Simple English definitions for legal terms
debt pooling
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A quick definition of debt pooling:
Debt pooling is when someone combines all their debts into one big debt. This makes it easier to manage and pay off. The person can negotiate with their creditors to pay less money each month or to pay back less overall. This is also called debt consolidation or debt adjustment.
A more thorough explanation:
Definition: Debt pooling is an agreement where a person's debts are combined into one and creditors agree to accept lower monthly payments or to take less money. It is also known as debt consolidation or debt adjustment.
Example: John has three credit cards with different balances and interest rates. He is struggling to make the minimum payments every month. He decides to apply for debt pooling, which combines all his credit card debts into one loan with a lower interest rate. John now has to make only one monthly payment, which is lower than the total of his previous payments.
Explanation: In this example, John's debts are consolidated into one loan, which makes it easier for him to manage his finances. The creditors agree to accept lower monthly payments because they know that John is committed to paying off his debts. Debt pooling helps people to reduce their debt burden and avoid defaulting on their loans.