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. How would a standby letter of credit be used during an export transaction?

    A standby letter of credit is typically used to provide a bank guarantee of payment for an exporter in the event that an ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. What is each party's role in a reverse repurchase agreement?

    There are two principal parties in a reverse repurchase agreement. The first party, often called the seller, is offering ... Read Full Answer >>
  6. What risks does the dealer (lender) in a reverse repurchase agreement take on?

    In a conventional repurchase agreement, or repo, the dealer is the borrower and takes on similar risks to borrowers in other ... Read Full Answer >>
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