How Many Kinds Of Letter Of Credit?

1. Confirmed L.C: The confirm letter of credit has the protection of credit standing of the importers as well as the importer's bank. The exporter's bank gives undertaking to honor the draft. The seller gets double assurance of payments form the issuing and advising bank.

2. Unconfirmed L.C: In case of an unconfirmed L.C the bank through whom the credit is negotiated, the advising bank does not give any guarantee to the exporter that the bill drawn will be honored by the issuing bank. The unconfirmed L.C is a commitment of the issuing bank to honor the draft.

3. Documentary L.C: A documentary L.C is one which provides for bills to be accompanied by the documents of title to goods.

4. Revocable letter of credit: A revocable L.C can be canceling or modified without the consent of all the parties. The issuing bank can inform the advising bank for any change in the L.C. The seller can face the problems of obtaining payment directory form the buyers.

5. Irrevocable letter of credit: Irrevocable credit cannot be altered or modified without the consent of all the parties i.e. the opener, the opening bank, the confirming bank and the bank beneficiary. This type of L.C is issued under terms and conditions of sales contract.

Difference between revocable and irrevocable letter of credit