Confirmed Letter Of Credit

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DEFINITION of 'Confirmed Letter Of Credit'

A second guarantee, in addition to a letter of credit, that commits to payment of the letter of credit. A confirmed letter of credit is typically used when the issuing bank of the letter of credit may have questionable creditworthiness and the seller seeks to get a second guarantee to assure payment.




INVESTOPEDIA EXPLAINS 'Confirmed Letter Of Credit'

A letter of credit is a document issued by a bank that allows the holder of the letter to draw the funds as stated on the letter from the issuing bank. In contrast to a confirmed letter of credit, if the seller does not seek the second guarantee, the document would be called a unconfirmed letter of credit.


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RELATED FAQS
  1. When is it necessary to get a letter of credit?

    A letter of credit is used when parties in a transaction don't know each other well and they want to be sure that each party ... Read Full Answer >>
  2. When are you legally required to get a letter of credit?

    You are legally required to obtain a letter of credit to guarantee a successful and risk-free transaction when dealing in ... Read Full Answer >>
  3. What's the difference between a bank guarantee and a letter of credit?

    A bank guarantee and a letter of credit are similar in many ways but they're two different things. Letters of credit ensure ... Read Full Answer >>
  4. Why do banks used the Five Cs of Credit?

    Banks use rigorous policies and analyses when determining if and how much money to lend to clients. The methods used by banks ... Read Full Answer >>
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    The major difference between a term and an open repurchase agreement (repo) is in the term or tenor. In a term repo, the ... Read Full Answer >>
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