What should a member do if their co-signer on an auto loan stops making payments?

When a co-signer on an auto loan ceases to make payments, it is essential for the borrower to take proactive steps to address the situation. Providing a Letter of Explanation (LOE) regarding the other person’s responsibility is the most appropriate course of action in this scenario.

A Letter of Explanation serves as a formal communication that outlines the circumstances surrounding the co-signer's non-payment and clarifies the borrower's understanding of their obligations. This document can be crucial for maintaining transparency with the lender, showing that the borrower is aware of the situation, and indicating their commitment to resolving it. Including this information can help mitigate any negative impacts on the borrower’s credit report and may facilitate discussions with the lender about potential solutions, such as renegotiation of loan terms or other remedies.

Addressing the issue through proper channels rather than ignoring it is crucial, as failing to acknowledge the problem can lead to further complications, including damage to credit ratings and potential legal actions. Additionally, simply paying off the loan or refinancing without first understanding the implications could lead to financial strain if not handled thoughtfully. Thus, documenting and informing the lender with a LOE is the key step in addressing the matter effectively.