Irrevocable Letter Of Credit - ILOC

AAA

DEFINITION of 'Irrevocable Letter Of Credit - ILOC'

Correspondence issued by a bank guaranteeing payment for goods and services purchased by the one requesting the letter. An irrevocable letter of credit, or ILOC, cannot be canceled or modified in any way without explicit consent by the affected parties involved. For example, the issuing bank has no power to change the terms of an ILOC simply because the letter requester is having second thoughts. It should be noted, however, that ILOCs are in effect only for a specified time period and do, in fact, expire at a pre-determined point.

INVESTOPEDIA EXPLAINS 'Irrevocable Letter Of Credit - ILOC'

Like many other forms of bank correspondence, irrevocable letters of credit are transferred and authenticated through SWIFT, as MT700s (message type 700). ILOCs give far more payment security to beneficiaries than revocable letters of credit and are particularly desirable for construction projects. This is because they are not subject to claims of preference in the result of a bankruptcy filing.

RELATED TERMS
  1. Transferable Letter Of Credit

    A letter of credit that permits the beneficiary of the letter ...
  2. Trade Finance

    The financing of international trade. Trade finance includes ...
  3. Sight Letter Of Credit

    A letter of credit that is payable once it is presented along ...
  4. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a ...
  5. Fully Funded Documentary Letter ...

    A written promise of payment provided by a buyer to a seller ...
  6. International Financial Reporting ...

    A set of international accounting standards stating how particular ...
Related Articles
  1. Credit & Loans

    When is it necessary to get a letter of credit?

    Capitalize on assets and negate risks by using a letter of credit. Letters of credit are often requested for buying, selling or trading.
  2. Economics

    What Is The World Trade Organization?

    The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it?
  3. Investing

    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 that a transaction proceeds as planned, while bank guarantees reduce ...
  4. Mutual Funds & ETFs

    Why would you keep funds in a money market account and not a savings account?

    Read about the differences between money market accounts and savings accounts, and see why a depositor would elect a money market over a savings account.
  5. Savings

    How Foreign Transaction Fees Work

    Using a credit card when you travel can be costly. Here's what you need to know about foreign transaction fees – plus tips on making purchases abroad.
  6. Savings

    Where To Get A Mortgage If You Have Bad Credit

    Here's where to go if you have a low credit score and still want a mortgage.
  7. Credit & Loans

    5 Ways To Get The Best Mortgage Rates

    A mortgage is the biggest loan most people have. Be sure you get the best possible terms – you'll be paying it off for years.
  8. Savings

    Picking A Lender: Quicken Loans Or A Local Bank?

    Online mortgage lender Quicken Loans has become known for its convenience and customer service. But brick-and-mortar banks offer benefits of their own.
  9. Savings

    Quicken Loans Vs. Other Mortgage Sources

    By allowing customers to initiate and manage the mortgage process online, Quicken Loans may appeal to borrowers who value convenience.
  10. Fundamental Analysis

    Why is due diligence important before a company acquisition?

    Learn about due diligence and company officials' fiduciary duty. Explore the ill-fated acquisition of Countrywide Financial by Bank of America.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center