Usance Letter Of Credit - Definition And How Does It Differ From Sight Letter Of Credit?

What is a Usance Letter Of Credit?

A Usance Letter Of Credit is a particular type of letter of credit where the buyer gets a predetermined credit period ie. These Usance letters of credit are payable within a predetermined time only after the presentation of the confirming documents. These are also known as Time LC or Deferred Payment LC.

How Is The Usance Letter Of Credit Different?

As we know that letters of credit are one of the most effective trade finance instruments used to facilitate international trade transactions by reducing the payment risks associated with global trade for both the buyers and sellers. However, there are many types of Letter of credit each of which has a different purpose for either importer or exporter and Usance LC is one of them.

The prominent feature that makes a usance or deferred letter of credit different from other types of LCs is its deferred payment option to the buyer. In other words, the period of the payment is pre-decided by the buyer and seller. The easiest way to understand a usance LC is to compare it with a sight LC. Keep reading to know.