Even college graduates who find great jobs can struggle with debt for years after leaving school, especially if they have expensive private student loans. And, for borrowers who can’t make ends meet, it’s nearly impossible to discharge student debts in bankruptcy. The result is an unending cascade, possibly decades long, of financial repercussions.
SoFi aims to change this glum reality. Using peer-to-peer lending between members of the public and qualified student borrowers, it launched earlier this decade with a student loan refinancing product for graduates of more than 2,000 U.S universities.
In subsequent years, SoFi has expanded its purview and now offers personal loans, mortgages, and non-loan products and services such as wealth management and life insurance. It has de-emphasized the peer-to-peer angle, though it remains plenty innovative in other ways.
SoFi offers the following financial products and services. Its loan rates may vary according to your current income and your credit score and history.
Student and Parent Loan Refinancing
SoFi offers refinancing loans that may lower the interest rates on your outstanding private and federal student loans. Refinancing is available for undergraduate loans, medical and dental loans, and Parent PLUS loans.
The minimum principal on any SoFi refinancing loan is $5,000. The maximum principal is the full outstanding balance of the refinanced loan. There are no application or origination fees. Terms range from 5 to 20 years.
SoFi refinancing loan rates vary with prevailing interest rates, pegged to the London Interbank Offered Rate (Libor). Though subject to change and dependent on your credit profile, rates on 5-, 7-, and 10-year loans are capped at 8.95%, and on 15- and 20-year loans at 9.95%.
SoFi offers fixed-rate personal loans with principal balances ranging from $5,000 to $100,000 and terms ranging from 3 to 7 years. Rates range from 6.99% to 14.99% APR and may vary with prevailing rates. There are no application or origination fees.
Though you don’t need to put up collateral for a SoFi personal loan, you do need good to excellent credit. There’s no pre-payment fee when you choose to pay principal ahead of schedule or pay off your loan in full before its term ends.
SoFi offers mortgage loans to borrowers in 32 states:
- Adjustable Rate Mortgages (ARMs): On the 7/1 ARM, you pay a fixed rate (currently about 4.816% APR) for 7 years, then accept yearly adjustments to your rate. This loan requires at least 10% down. On the 5/1 interest-only ARM, you pay interest only for 10 years, with your rate fixed for the first 5 (currently about 5.168% APR). Thereafter, your rate adjusts annually, with principal repayments back-loaded onto the loan’s last 20 years. This loan requires at least 25% down. Rates on these adjustable options can’t rise by more than 2% in one year and more than 6% over the life of the loan.
- Fixed Rate Mortgages: 30-year fixed mortgages start at 4.928% APR and require as little as 10% down. 15-year fixed mortgages start at 4.59% APR and also require as little as 10% down. Principal and interest payments are made at the same rate for the entire length of the loan. SoFi issues mortgage loans as large as $2.5 million and never charges origination fees.
- Refinancing Loans: SoFi offers traditional refinancing loans with a maximum of 80% LTV. Rates and terms are identical to SoFi’s fixed and adjustable rate purchase loans.
- Cash-Out Refinancing Loans: SoFi also offers cash-out refinancing loans with maximum LTV of 65%. Rates and terms are identical.
- Student Loan Refinancing: SoFi’s student loan refinancing mortgage allows you to refinance your home loan at a lower rate and use some of the equity in your home to pay down your student debt. The maximum LTV is 80%.
No SoFi mortgage loan requires borrower-paid private mortgage insurance (PMI), even when the down payment is less than 20%.
SoFi’s wealth management program is a robo-advisor in the mold of Wealthfront or Betterment. The minimum opening investment is $100, and balances are protected by SIPC insurance up to $500,000 per account type. Taxable and tax-advantaged retirement accounts are available. Funds are invested in a variety of ETFs and other diversified financial instruments, depending on your risk tolerance, and portfolios are rebalanced on a quarterly basis.
SoFi partners with Ladder, an insurance startup, to offer term life insurance policies for qualifying U.S. clients. Policy terms range from 10 to 30 years. Benefits (policy size) range from $100,000 to $8 million. Premiums by policyholder profile (risk), term, and benefit size.
SoFi’s Entrepreneur Program is basically a seed fund for budding businesses launched by SoFi borrowers or wealth management clients. In addition to seed capital, SoFi provides mentorship and support resources, access to other SoFi members (who may be prospective customers), and access to third-party investors at its annual Demo Day pitch competition. Demo Day winners draw additional investments from SoFi’s seed fund, as well.
SoFi’s Career Services department provides comprehensive career coaching assistance to current and former SoFi members. Services rendered may include job search assistance, career transition coaching, professional development, personal branding advice, and general career guidance.
SoFi lets you create a unique referral link that you can share with friends who might be interested in its products. For every successfully referred individual who opens their first SoFi loan, you earn $300. SoFi is also currently offering a $300 bonus to new borrowers who sign up through a referral link, though this could change in the future. You’re limited to 20 referrals in a 12-month period and 60 lifetime referrals.
If you’re laid off from your job, SoFi may temporarily suspend your monthly loan repayments and help you find a new job by connecting you with other borrowers, investors, and alumni in its network. You must reapply for this program every three months. SoFi only suspends loan payments for a total of 12 months over the entire life of the loan. During the suspension period, your loan continues to accrue interest, which is capitalized (added to the principal).
To earn Unemployment Protection, you must be eligible for government unemployment benefits. To remain in this program, you must actively work with SoFi’s Career Services department to find a new job. If you obtained your loan with a cosigner, both of you must be unemployed to qualify.
When you set up automatic debit payments (autopay) on your SoFi loan, you qualify for a 0.25% reduction in its effective interest rate for as long as the autopay arrangement remains in place. For instance, autopay drops the rate on a loan originated at 6% to 5.75%.
SoFi Member Discount
Qualifying SoFi borrowers may be eligible for rate discounts of 0.125% on second (and subsequent) SoFi loans when they maintain their original loans in good standing. If you’ve already refinanced your student loans and feel ready to buy a house, your patronage could save you thousands of dollars in interest over the life of your loan.
1. Help for Entrepreneurs and Temporarily Unemployed Borrowers
SoFi doesn’t just temporarily suspend loan repayments for laid-off and entrepreneurial borrowers – it also lets you leverage its community of investors and borrowers for business development assistance, mentoring, and even startup funding.
No other student lenders offer such a comprehensive deferment-and-support program for entrepreneurs. The Small Business Administration’s Student Startup Plan, however, does allow budding entrepreneurs to opt for income-based repayment on their outstanding federal loans. Federal Sallie Mae loans feature up to three years of unemployment deferment, compared to SoFi’s 12 months, but the organization doesn’t provide additional services like SoFi does.
2. No Origination Fees
SoFi loans don’t have origination fees. That’s great news for cash-strapped borrowers. Other private student loan consolidation services, such as NextStudent and Student Loan Network, may charge origination fees of up to 5%. And mortgage origination fees are common among traditional lenders like Wells Fargo. Other personal loan providers, such as Lending Club, may charge far higher origination fees (up to 5%, in some cases) on personal loans.
3. Attractive Fixed Rates for Qualified Borrowers
If you can qualify for a SoFi loan with a fixed interest rate, it may come at a significant discount compared to other lenders. Rates on SoFi’s student loan refinancing products come in at under 10%, regardless of creditworthiness or principal. Mortgage rates are competitive, as well.
4. Free Professional Development, Networking, and Business Funding Support
SoFi has a slew of value-added programs, such as the Entrepreneur Program and career coaching. While traditional lenders such as Sallie Mae and Wells Fargo provide college planning tools and general financial advice, their borrowers can’t leverage an entire community’s insights and resources. And, though peer-to-peer lenders like Lending Club follow SoFi’s lead and encourage borrowers to eventually become investors, creating a de facto community, they don’t exploit that community to offer networking opportunities or professional development services.
5. Lucrative Referral Program
SoFi’s $300 referral bonus is a fantastic incentive to bring friends onboard. You can refer up to 20 friends in a 12-month period and 60 over the course of a lifetime – notching up to $18,000 in referral bonuses in the process. Though Sallie Mae has a referral program for lenders in its network, no other lender with a national profile offers such an attractive referral program for individual borrowers.
6. Low-Fee Wealth Management With Low Minimums
SoFi’s wealth management vertical is its most democratic, with a low minimum investment ($100) and no SoFi fees (though funds held in your SoFi portfolio do carry fees). If you’re looking for a cheap, serviceable automated wealth management program to begin building your nest egg, you can do a lot worse.
1. Strict Financial Eligibility Criteria
SoFi makes lending decisions on a case-by-case basis and doesn’t disclose the specifics of its methodology. However, to qualify for refinancing – which is the easiest way for graduates to become members – you must have a superior credit score and ample monthly cash flow.
2. Loans Aren’t Available Everywhere
SoFi doesn’t offer student loan refinancing in Maryland, and its mortgage products are available in just 32 states. If you live in an area not served by SoFi, you’ll need to look elsewhere, no matter how attractive you find the company’s products.
3. Variable Rate Options May Not Save You Much
Though SoFi’s fixed loan rates are generally cheaper than other lenders’, its variable rates for student loans and refinancing may not be. For instance, variable rates on Discover MBA loans are 1% to 3% cheaper than comparable SoFi loans.
Are You Eligible for a SoFi Loan?
To be eligible for any SoFi loan, you must meet these universal criteria:
- Citizen or permanent resident status
- 18 years of age or older
- No bankruptcy declarations within the past 3 years
- Currently employed or holding a binding offer of future employment
SoFi also uses strict underwriting criteria – the specifics of which aren’t made public – to approve or deny loan applications. To have a good chance of being approved, you need to be ineligible for federal loan forgiveness programs, have a credit score of at least 700, and have a moderate debt-to-income ratio. However, SoFi doesn’t clearly define “moderate.” You must also have, or expect to have shortly, at least a four-year degree.
SoFi is an increasingly popular option for borrowers seeking to refinance student loans or obtain mortgage loans and personal loans. Though your exact loan cost depends on your credit history and the amount you’re borrowing, rates are lower than those of many competitors. Plus, customers get valuable perks, including networking opportunities and job search assistance, that aren’t available through traditional lenders. It’s like a career coach, personal finance expert, and lender, all in one package.
Lately, SoFi has tiptoed beyond the consumer lending space, moving into wealth management and insurance. It’s an exciting time to be a SoFi member.
Have you used SoFi to refinance your student loans?