What is an Irrevocable Letter of Credit

An irrevocable letter of credit is a financial instrument that a bank issues to a buyer at the request of a seller. The letter of credit guarantees that the seller will receive payment from the bank as long as the seller meets the terms and conditions specified in the letter of credit. Once an irrevocable letter of credit has been issued, it cannot be changed or canceled without the agreement of all parties involved. This provides a level of security to the seller, as they can be confident that they will receive payment even if the buyer is unable to pay. Irrevocable letters of credit are often used in international trade transactions to reduce the risk of nonpayment.