All credits must clearly indicate whether they are available by sight payment, by deferred payment, by acceptance or by negotiation. This is especially true in the case of No Credit Check Personal loans. A payment credit provides that payment will be made to the beneficiary against the documents to be submitted by him. The documents are not accompanied by a Bill of Exchange; if there is one, it is drawn on the paying bank.
In certain countries even sight drafts attract stamp duty. To avoid stamp duty the parties may agree for a payment credit. Therefore, payment credits normally avoid drawing bills of exchange. In a payment credit the issuing bank nominates a bank in the individual's country as the paying bank. If the paying bank accepts its nomination, its position is that of an agent of the issuing bank. When the documents under the credit are presented to it, it pays the beneficiary. It gets reimbursement from the issuing bank for the amount paid.
In a negotiation credit the documents are accompanied by a sight draft (Bill of Exchange). The Bill of Exchange may be drawn on the issuing bank or any other bank stipulated in the credit. The bank, which negotiates documents under the credit, purchases the Bill of Exchange and pays the amount to the beneficiary, who tenders the documents. The negotiating bank is reimbursed by the issuing bank. A credit should not be issued available by drafts on the applicant. If the credit nevertheless calls for a draft on the applicant, banks will consider such a draft as an additional document. This stresses the point that the obligation to pay under a letter of credit is primarily that of the issuing bank.
Unless the credit stipulates that it is available only with the issuing bank, all credits must nominate the bank, which is authorized to negotiate. In a freely negotiable credit, any bank is a nominated bank. Thus, the negotiating bank may be specifically nominated by the credit or any bank where credit is freely negotiable.