Domestic L/C and Payment Guarantee: Decoding the Difference
11/07/2025
Let's explore this article to decode the differences between domestic L/C and payment guarantee right away.
Domestic L/C and payment guarantee are two of the important tools that help businesses protect their interests in commercial transactions. So, what are the differences between these two forms? This article will help you decipher the differences between domestic L/C and payment guarantee, thereby making a reasonable decision for your business.
What is domestic L/C and payment guarantee?
Domestic L/C and payment guarantee are two solutions commonly used in commercial transactions, helping to ensure safety and efficiency for transactions between two parties. However, these two methods have some important differences that businesses need to understand to choose the right one for their transactions. Among them:
Local Currency Letter of Credit is a payment commitment.of the issuing bank to the seller when they present a complete set of documents as prescribed by the L/C.
Payment guarantee is a commitment by a bank to pay the beneficiary a certain amount of money if the guaranteed party fails to fulfill its payment obligations under the contract.
Domestic L/C and payment guarantee are two popular payment instruments.
Compare L/C and payment guarantee
L/C (Letter of Credit) and payment guarantee have differences in nature, shown in the following points:
Characteristic
L/C
Payment Guarantee
Payment commitment
The bank only commits to pay the seller when they present a complete set of documents according to the L/C regulations.
The bank undertakes to pay the beneficiary a certain amount of money if the beneficiary provides documents proving that the guaranteed party fails to fulfill its payment obligations under the contract.
Intended use
The main purpose of L/C is to ensure the safety of payment in transactions. The bank only pays when the seller presents a complete set of documents as prescribed, helping to minimize risks for both the buyer and the seller.
The main purpose of a payment guarantee is to ensure that the beneficiary will receive payment when due. The bank will pay the beneficiary if the guaranteed party fails to fulfill its payment obligation, helping to protect the beneficiary's interests.
Legal relationship
L/C is an independent contract between the bank and the parties involved. The legal relationship between the buyer and the seller does not affect the bank's payment obligations under the L/C.
Payment guarantees are established based on the provisions of the contract. The bank will only pay the beneficiary when they prove that the guaranteed party does not fulfill its payment obligations under the sales contract.
Risk Level
The main risk of L/C is the risk of documents. If the seller's documents do not comply with the provisions of L/C, the bank may refuse to pay.
The main risk of a payment guarantee is the risk that the guaranteed party will not perform its payment obligation. The bank will only pay the beneficiary if it proves that the guaranteed party has not performed its payment obligation under the sales contract.
The two payment instruments L/C and Payment Guarantee will be different.
Which form of payment guarantee should businesses choose in domestic sales transactions?
Domestic L/C and Payment Guarantee are two forms of obligation guarantee. paycommonly used in domestic trade, however each form awakeEach payment method has its own advantages and disadvantages depending on the specific situation. Businesses need to carefully consider the following factors to choose the most suitable payment method:
Partner reliability:
Domestic L/C: Should be used when transacting with new partners that do not have much reputation.
Payment guarantee: Can be used when dealing with reputable partners who have a long-term cooperative relationship.
Financial capacity of the enterprise:
Domestic L/C: Higher cost than payment guarantee, suitable for businesses with good financial capacity.
Payment guarantee: Lower cost than domestic L/C, suitable for businesses with limited financial capacity.
Other factors:
Nature of goods: Domestic L/C is suitable for goods trading transactions, while payment guarantee can be applied to both goods trading and service provision transactions.
Payment Time: Payment guarantee is suitable for transactions with flexible payment times.
Depending on the needs of the business to choose L/C or payment guarantee
L/C and payment guarantee services at SeABank
If your business is looking for a reputable provider of domestic L/C solutions and payment guarantees to ensure the safety of your transactions, please refer to SeABank's diverse products. SeABank, the leading commercial bank in Vietnam, is pleased to introduce Domestic L/C and Payment Guarantee Services - a safe and effective payment guarantee solution for businesses in domestic trade transactions.
SeABank's domestic L/C and Payment guarantee have outstanding advantages such as:
Safety guarantee: The seller is always guaranteed payment by the bank issuing the domestic L/C/payment guarantee when presenting documents in accordance with the provisions of the L/C/payment guarantee.
Simple and quick procedures, avoiding delaying business transaction time.
Cost savings: Competitive rates, suitable for all business sizes.
Reputation: SeABank is a reputable bank with many years of experience in the financial sector. trade aid, guarantee, trusted by a large number of customers.
Professional service: A team of enthusiastic and experienced consultants, timely support and ready to answer all customer questions.
SeABank provides ServicesL/CDomestic and Secure Payment Guarantee for Business
Choosing the right payment guarantee solution is the key to a successful and safe purchase transaction. Hopefully this article has provided you with useful information to decode the difference between domestic L/C and payment guarantee. SeABank understands the importance of these financial instruments and is ready to provide suitable services to support your business. If you are looking for payment guarantee solutions or need advice on how to use domestic L/C and payment guarantees effectively, please contact SeABank at website or contact Hotline 1900.599.952 (KHDN).
