Letter of credit types
A letter of credit is an agreement which is separate from the sales contract or other document having the effect of an agreement on which it is based.
There are the following basic types of documentary letters of credit
- A covered letter of credit – one secured by the payer's own funds.
- An uncovered letter of credit – one not secured by funds of the payer as per the moment of opening
- A confirmed letter of credit – implies adding payment obligation by a bank other than the issuing bank, where documents are provided meeting the letter of credit conditions.