Types of Letter of Credit

There are different types of Letter of Credit some of them explained below.

• Irrevocable LC
• Revocable LC
• Stand-by- LC
• Confirmed LC
• Unconfirmed LC
• Transferable LC
• Back-to-Back LC
• Payment at sight LC
• Deferred charge LC
• Red clause LC

Irrevocable LC

This LC cannot be cancelled or modified without consent of the beneficiary (vendor). This LC reflects absolute liability of the financial institution (provider) to the alternative celebration.

Revocable LC

This kind of LC may be cancelled or modified via the financial institution (company) on the consumer's instructions without earlier agreement of the beneficiary (dealer). The financial institution will no longer have any liabilities to the beneficiary after revocation of the LC.

Stand-by- LC

This LC is towards the financial institution guarantee and gives more bendy collaboration opportunity to dealer and consumer. The bank will credit the LC whilst the consumer fails to satisfy fee liabilities to supplier.

Confirmed LC

Further to the bank guarantee of the LC provider, this LC type is showed by means of the seller's bank or any other financial institution. Irrespective to the price via the financial institution issuing the LC (provider), the financial institution confirming the LC is accountable for overall performance of duties.

Unconfirmed LC

Only the bank issuing the LC will be chargeable for price of this LC.

Transferable LC

This LC allows the vendor to assign a part of the letter of credit to other parties. This lc is mainly beneficial in those cases when the seller isn't always a sole producer of the goods and purchases some elements from other events, because it gets rid of the necessity of commencing numerous LC.

Back-to-Back LC

This LC type considers issuing the second LC on the premise of the first letter of credit score. LC is opened in favor of intermediary as in step with the purchaser's instructions and on the basis of this LC and commands of the intermediary a brand new LC is opened in choose of seller of the products.

Payment at sight LC

Consistent with this LC, charge is made to the seller right now (maximum inside 7 days) after the specified documents have been submitted.

Deferred charge LC

In keeping with this LC the charge to the seller isn't always made when the files are submitted, but as a substitute at a later length described within the letter of credit. In most instances the price in choose of seller under this LC is made upon receipt of goods by the client.

Red clause LC

The vendor can request boost for an agreed amount of the LC earlier than shipment of goods and submittal of required documents. This red clause is so termed due to the fact it is usually published in red on the document to draw attention to "advance charge" time period of the credit.

Letter of Credit

Letter of credit is a letter issued by a bank to another bank as a guarantee that payments would be made as per scheduled and full.
In other words a letter of credit is issued by bank from the buyer as a guarantee to another bank and to seller that payments would be made on time and correct amount.
On the other hand if a buyer could not pay the guaranteed amount to the bank than bank is authorised to recover the full or remaining amount of the goods purchased. Here we must recognized Letter of credit is dealt in documents not in goods by the bank so it can be called Documentary Credit Letter.

  Benefits of letter of Credit

• The seller has the responsibility of customer's bank's to pay for the shipped items.
• Decreasing the production hazard, if the consumer cancels or modifications his order.
• The opportunity to get financing in the period among the shipment of the products and receipt of charge (mainly, in case of deferred price).
• The vendor is able to calculate the charge date for the goods.
• The buyer will not be capable of refuse to pay because of a criticism about the products.

Drawbacks of Letter of Credit

• The bank pays the seller for the products, on condition that the latter affords to the bank the determined documents in keeping with the phrases of the letter of credit score.
• The purchaser can manipulate the term for shipping of the products.
• By using a letter of credit, the client demonstrates his solvency.
• Within the case of issuing a letter of credit score imparting for delayed fee, the vendor presents a credit score to the consumer.
• Presenting a letter of credit lets in the customer to avoid or reduce pre-bills.

Trade Finance

Trade Finance is an activity between an exporter and a bank where bank finance the importer for his or her export transaction and LC (Letter of credit) is used for document purpose.

Need of Trade Finance

Trade finance needed when an exporter wants to export goods from one country to another country and he or she is facing financial crises so bank takes guarantee (Cash in advance) from the importer then shipping is processed.

It includes letter of credit,Bank,Insurance company,export credit agency,Shipping agency.

Trade finance also mitigates the risk involved in international trade.

Credit Card Process

A Credit card process can be defined as a customer or a client of a bank goes for the credit card acquisition application to bank for credit card process a relationship manager of a bank get the signed application of credit card from a customer and receives necessary documents for further credit card process credit card application then computerized by the bank but here are some banks they are offering online acquisition of credit card application for credit process and application goes to credit analyst for approval after approval credit application forward to credit disbursement and plastic card making department and then issued to customer at his or her signed address this credit card process been done by the bank.

When a customer receives the card and then wants to buy goods or services from any other retailer then he or her purchases goods or services, for payment a customer gives the credit card to the retailer he swipes the card from merchant machine and gives the bill to the customer. A merchant machine forwards the detail of the customer online to the bank this all over credit card process between a customer and a bank.

What is Credit Card?

What is credit card? A Credit card is a small plastic card supplied by a bank to develop society, etc., permitting the card holder to purchase goods or services on credit and repay them in full.

In other words what the credit card is? Banks produce revolving account and award a line of credit to the borrower, from which the borrower can borrow money for payment to a merchant or as a cash advance. ... A credit card obliges the balance to be repaid in full each month.

These were the simple explanations of what is credit card?

Debt Buyer

Whilst the  borrower has realised that it isn’t in all likelihood to payback, it will reduce its charges by means of promoting that debt to a debt client. Borrowers package collectively severa bills with similar capabilities and promote them as organization. Debt customers can pick out from programs of bills that are not that old and that no different collector has labored on yet, accounts that are pretty antique and that different creditors have failed to collect on, and bills that fall somewhere in between.

Debt shoppers regularly buy these applications through a bidding procedure, paying on average four cents for each $1 of debt face value. In other phrases, a debt purchaser may pay $40 to purchase a delinquent account where the stability owed is $1,000. The older the debt, the less it prices, considering that it's far much less likely to be collectable.

The kind of debt also affects the rate; loan debt is well worth extra, at the same time as software debt is well worth less. Debt consumers maintain the entirety they acquire; due to the fact they have purchased the debt from the borrower, they don’t send any of the amount gathered to that creditor.

Debt collectors receives a commission once they recover a delinquent debt; the more they get better, the greater they earn. Old debt that is past the statute of obstacles or is in any other case deemed uncollectable is bought for pennies on the dollar, making collectors huge income.

Types of Credit

There are some different types of Credit that are defined as under.

• Installment loans, including auto loans, student loans and furniture purchases
• Mortgage loans
• Bank credit cards
• Retail credit cards
• Gas station credit cards
• Unpaid loans taken on by collection agencies or debt buyers
• Rental data  

Installment Loans

Installment loans is a loan that a borrower pay back the credit after a certain period of time with a fixed schedule that is called Installment loan.

  Mortgage Loan

Mortgage loan is a loan where lender demands security so any property is taken as a collateral and then pay the borrower a certain amount of money to pay back with a fixed schedule.

Bank Credit Card

Bank credit card is a card that is issued by the lender (Bank) to borrower to receive goods and services and payback to the lender with plus amount.

The lender (Bank) initiates a revolving account and awards a line of credit to the borrower, from which the borrower can borrow money for payment to a merchant or as a cash advance.

Retail credit cards

Retail credit card is also called a store credit card where a lender (Store may be) can issue a retail credit card to its customer for a certain limit as a third party of regulator where customer shops goods and services from any store and get befitted from the store like discounts,free shipping etc.. 

Gas station credit cards

This changed into done to avoid a credit card interchange fee which raised the price of gas notably. The first business fuel cards resembled a credit score card with a name and a employer logo on them. When a consumer entered a fueling station, the cashier might take down the consumer's name and corporation facts.