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. Accommodation Endorsement

    A written agreement from one entity to back the credit liability ...
  3. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a ...
  4. Trade Finance

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

    A letter of credit that is payable once it is presented along ...
  6. International Financial Reporting ...

    A set of international accounting standards stating how particular ...
Related Articles
  1. What Is The World Trade Organization?
    Economics

    What Is The World Trade Organization?

  2. What's the difference between a bank ...
    Investing

    What's the difference between a bank ...

  3. An Investor's Guide To Bank Stress-Testing
    Investing Basics

    An Investor's Guide To Bank Stress-Testing

  4. What is the difference between a state ...
    Credit & Loans

    What is the difference between a state ...

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center