SoFi has quickly become a juggernaut in FinTech (financial technology). Founded in 2011, SoFi is formally called Social Finance, Inc. The San Francisco-based startup specializes in personal loans, mortgages, and student loan refinancing.
If you're thinking about going to SoFi for a loan, first figure out if the company is a good option for you. This guide covers all you need to know.
What is SoFi?
SoFi touts itself as a new kind of finance company. The online lender was founded with a vision to make student loans more affordable.
Today, SoFi has expanded from just student loan refinancing and has become one of the best online loans sites on the web.. The company now provides mortgages and personal loans to qualified borrowers, as well as wealth management products.
In SoFi's first six years of operation (2011-2016), the lender funded $15 billion in loans, saving its 225,000 members an estimated $760 million. SoFi states its great rates and lack of fees has helped borrowers save so much.
SoFi's underwriting approach differs from traditional financial institutions. Factors considered include:
- Education
- Career experience
- Financial history and credit
- Monthly income versus total expenses
SoFi's Pros
There are several unique advantages to taking out a personal loan or refinancing a student loan with SoFi. These include:
- Low interest rates: It will be very difficult to find lenders with better rates.
- Zero fees: There are no origination fees, pre-payment penalties, or hidden fees.
- Unemployment protection: If you lose your job, SoFi allows you to postpone payments for up to 12 months for student and personal loans. (Note: This does not apply if you quit your job voluntarily.)
SoFi began as a company focused on helping college graduates refinance debt from education. If you refinance your student loans with SoFi, you get numerous benefits, such as:
- The ability to refinance both federal and private student loans.
- Career support, which includes help with networking, building a brand, negotiating salary, and more.
- The chance to join the SoFi Entrepreneur Program. This not only allows you to defer loans for up to six months, but also grants you access to mentors, investors, and networking events.
Additionally, SoFi is known for having good customer service. Available seven days a week, SoFi agents will work with you to ensure you're making decisions that will save you money and give you financial flexibility. SoFi can also help with debt consolidation, which many online loan sites cannot.
SoFi's Cons
SoFi's borrowers have a very low three-year default rate. It's an impressive 2.98 percent. For federal student loan borrowers, that rate is 11.8 percent. This is part of the reason why SoFi is able to offer such good rates and terms: Risk is minimal.
To keep risk low, SoFi has strict loan requirements. Generally speaking, you need to meet the following criteria:
- Great credit: The minimum credit score is 660, but the average borrower at SoFi has an impressive score of 774.
- Good income: The median annual income of SoFi borrowers is $106,000. You can still be approved even if you make significantly less, but your expense-to-income ratio must be good.
- Solid financial history: SoFi typically wants to see that you know how to budget and manage money. A bad financial event in the past, like a delinquent account, could make it tough for you to be approved.
So, the main issue with SoFi loans is that they are inaccessible to a large amount of people. The target group seems to be well-educated folks with high-paying jobs. This could change as the company grows, though.
Another thing to realize is that SoFi's loan products aren't fully available in certain states. For instance, as of January 2016, you can't get a personal loan from SoFi if you live in Mississippi or Nevada (this may change later, though).
Also, keep in mind that, if you refinance a federal student loan, you lose the benefits that come with it, like the income-based repayment program. If your debt load is high, it's probably safer to just stick with the federal loan (if applicable).
What are the costs and fees of SoFi?
SoFi's loans have no origination fees or pre-payment penalties. There aren't hidden fees, either.
There is no catch here. You simply pay back interest and principal.
What are the reviews for SoFi like?
Here's a quick roundup of what some popular finance and consumer review sites are saying about SoFi:
- NerdWallet states the interest rates and career resources are great, but there needs to be better forbearance protection.
- Credit Karma has a rating of 4.9 out of 5 for SoFi—one of the highest among online lenders.
- Student Loan Sherpa, a highly popular blog, rates SoFi number one among all private loan consolidators.
- Yelp users give SoFi a 4-star rating. Many praise the lender for great interest rates, an efficient application process, and solid customer service. Some, though, complain about getting denied or having higher-than-expected rates.
How does SoFi compare to competitors?
Typically, you'll get lower interest rates with SoFi than with many major online lenders, like Lending Club, BestEgg, and Upstart. Also, the lack of fees makes borrowing with SoFi even cheaper.
If you look around, though, you may find local banks and online lenders offering better rates and terms. Some online lenders that are really competitive on rates and fees include LendKey, Earnest, and iHelp.
Many personal finance experts recognize SoFi as one of the best options for student loan refinancing and personal loans, but it's not necessarily always the best place to go.
To get the best deal on a loan, shop around. Compare what you get from SoFi with two or three other lenders. Then, choose the one with the best rates and terms for you.