Facts of a letter of credit that you should know before opting for it

A letter of credit is a type of document that guarantees payment in international trade and is a very popular financial instrument amongst international traders. Hence, if you are also involved in international trade and also want to secure the payment then you can also opt for a letter of credit. 

However, before you opt for a letter of credit, you should know the following facts: 

Know the type of letter of credit 

There are various types of letter of credit available out there and each type of letter of credit has its own perks and benefits. If you want to opt for a letter of credit, you should first know about all the types available out there and should know their perks and benefits. You should choose the one which is most suitable for your needs and can fulfill your requirements. Generally, out of all the types of letters of credit, a confirmed letter of credit is by far the most popular amongst international traders. This is due to the reason that confirmed LC has numerous benefits and is more secure than most other letters of credit. Hence, if you want more secured payments then you can also opt for LC confirmation.

Know who is eligible 

Another thing that you must try to find out is whether you are eligible for getting the letter of credit or not. You see, generally, most international traders are eligible for getting a letter of credit, however, there are some exceptions when an international trader might not get a letter of credit. Knowing the eligibility criteria for the letter of credit that you are choosing can prove to be very helpful. 

Know what documents you will need 

To get the letter of credit in time, you might have to submit some crucial documents. If you are unable to submit the necessary documents then you will not get the letter of credit in time. Hence, if you want to get the letter of credit, you need to first know about all the documents that you would have to submit. After knowing about all the documents that you would need, you need to next arrange all the documents properly for submission. This way, you can get the letter of credit in time without any kind of delay.