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Want To Eliminate Risks During Trading? Use Letter Of Credit

A letter of credit a legally binding agreement with some terms and conditions. It commonly-known as a credit letter that is issued by the bank as a guarantee. See more: https://bit.ly/2XY0cDZ<br>

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Want To Eliminate Risks During Trading? Use Letter Of Credit

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  1. Want To Eliminate Risks During Trading? Use Letter Of Credit

  2. A credit letter usually reduces the fear between the two people or companies and is considered as the best solution to guarantee payment. Generally, the buyer will be afraid of paying for the goods in advance thinking there can be many risks in it. Sellers, on the other hand, will feel uncomfortable to supply the services or goods thinking about what will happen if they are not paid after delivering it. To avoid this, a legal binding agreement is made during this transaction known as a letter of credit.

  3. There are different types of LC issued by the financial institute and used for different transaction purposes. Ultimately, by using the credit letter one can ensure the successful transactions between the buyer and the seller. Basically, this is considered as the guarantee made by the buyer to the seller that he/she will pay the amount involved in the trading after receiving the goods or services. With the credit letter issued, the seller will agree to proceed with the trading without any fear.

  4.  It is worth remembering that the bank will pay the amount only when everything is followed by both buyer and seller as mentioned in the credit letter. The bank will not pay the amount if there are any mistakes in the document like spelling change and a few more. Thus it is better to verify the letter once to ensure that there is no mistake in the document. Next time use this credit letter when you trade with unknown people or companies to reduce any risks involved in the process.

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