SoFi is a leading marketplace lender of personal loans and mortgages, and the number one provider of student loan refinancing. The secret of its success is no secret at all. SoFi offers ultra-low interest rates, excellent terms and a hassle-free application process. How does a relatively new player in the loan business compete with international banks and established alternative lenders? By being extremely selective about who it does business with.
Who Are SoFi’s Student Loans Designed For?
SoFi only lends to super-prime borrowers. In other words, its lending pool is limited to borrowers with a good education, substantial and steady incomes, a proven track of financial discipline and excellent credit. If you want a loan and you meet SoFi’s eligibility criteria, you are practically guaranteed a good experience. For those who are denied a loan, SoFi’s stringent requirements will be frustrating; but they can at least take comfort in that the application process was simple and the rejection swift.
SoFi, which stands for Social Financing, was founded in 2011 by four Stanford MBA students as a school project. If the company’s balance sheet and BBB rating is anything to by, it’s safe to say the school project got an A+. The startup began as a peer-to-peer lending marketplace for Stanford alumni. Graduates got a chance to refinance their loans at lower rates and the alumni could feel good about themselves while they got a halfway decent return on their investment. A win-win arrangement. The alumni/community loans model was then extended to other top universities.
Fast forward to 2015, and although there is still some “alumni money” in every student loan refinance, most of the funds used to finance SoFi loans come from large institutional investors. SoFi is exceptionally well-funded, which gives it an edge on many of its cash-strapped competitors. As of September 2015, it has received over $766 million from 17 investors that include venture capital firms like Lakestar, Wellington Management, and Baseline Ventures, and celebrity private investors, such as Ron Suber, President of Prosper, and Peter Thiel, co-founder of PayPal and partner at Founders Fund.
As you probably noticed already, we are excited about the opportunity SoFi provides financially responsible borrowers. It is high time borrowers were given access to the current surplus of institutional investor money that is looking for a decent return in a time when money markets and bonds produce laughable yields. This review will take an in-depth look at SoFi’s student loan refinancing, personal loans,and mortgages to provide you with what you need to make an informed decision.
SoFi: Student Loan Refinancing
Despite its growth, student loan refinancing is still at the heart of SoFi. With over $3 billion lent to date, SoFi is the biggest player in student loan refinancing.
Why are SoFi student loans so popular?
Here are just a few of the benefits SoFi provides borrowers.
- There are no application or origination fees
- You can get pre-approved and find out your rate in 5 minutes without a hard credit pull
- If you lose your job, SoFi will pause payments and help you find a new one
- No prepayment penalties
- Interest rates are extremely low
- Variable interest rates are capped
- Fast approval procedure
- Loans are funded within 4 to 5 days
What Are SoFi’s Student Loan Refinance Interest Rates and Terms?
As of August 2016, SoFi’s interest rates range from
- 2.20% to 6.00% APR for variable-rate loans
- 3.50% to 7.74% APR for fixed-rate loans.
These rates include a 0.25% discount for borrowers who enroll in autopay. Borrowers who don’t agree to automatic payments must add 0.25% to their rate. See our SoFi Review on student loan refinancing for current rates.
Borrowers can choose terms ranging from 5 to 20 years. Although monthly payments are lower with longer terms, the interest rate and the total cost of the loan are higher.
Variable rate loans have lower interest rates, but they are linked to the one-month LIBOR index (the average rate at which a select group of large banks can borrow money from other banks), which can change monthly and increase the cost of the loan. The good news with SoFi student loans is that variable loans are capped at 9.25% APR for 5, 7, and 10-year terms and at 10.25% APR for 15 and 20-year terms.
What Is SoFi’s Student Loan Refinance Eligibility Criteria?
SoFi only lends to super-prime borrowers and has strict credit requirements. These include:
- Have a 4-year undergraduate or graduate degree from an institution accredited to receive federal aid (Title IV accredited institutions)
- Have a good employment record and be either currently employed or have a confirmed job offer
- Have a strong monthly cash flow
- Have at least $10,000 in student loans (private or federal)
- An excellent credit score
- Be in good standing with current student loans
- And be a US citizen or permanent resident.
Even if you do qualify for a loan with SoFi, you may not get the lowest rates. Remember you are competing with the best of the best when it comes to credit score and debt to income ratios.
The one caveat of refinancing your student loan with SoFi is that you may lose some protections that come with US student loans. For instance, the Public Service Loan Forgiveness Program lets people who work full-time for certain organizations (such as government and not-for-profit organizations) off the hook for the balance of their student loans if they make on time payments for 10 years.
How Does SoFi’s Student Loan Refinance Application Process Work?
SoFi’s student loan application has four simple stages. We have added screenshots and descriptions of each stage so you know exactly what to expect.
Step 1 — Provide Personal, School, Employment and Loan Information
This stage determines whether a borrower meets SoFi’s eligibility criteria. Borrowers must provide their name, address, date of birth, citizenship status, the school they attended, the degrees they completed, their place of employment, income and work experience. It is at this stage you must also specify the loan amount you require to refinance all your student loans.
Step 1b — Specify Your University, Program And Graduation Date
Step 1c — Choose Your Student Loan Amount
Step 2 — Choose the Loan Type and Calculate Your Savings
Based on the information provided in stage 1, SoFi provides borrowers with an interest rate, or—to be more precise—a range of interest rates. The actual rate will depend on several factors, such as the loan amount, term, and whether it’s a variable interest or fixed interest loan. Borrowers must now provide details on their current loan balance, remaining term and average interest rate so that SoFi can estimate the savings they can expect from refinancing.
Step 2b — Chose Your Loan Term and Rate Type
Step 2c — Provide Details About The Student Loans You’re Refinancing
Step 3 — Upload Documents to Verify Your Information
SoFi requires borrowers to upload documents so it can verify the identity, income, address and loan information provided in the previous stages. SoFi accepts photographs, scans or even screenshots.
Step 3b — Don’t Forget to Include Address Verification And Your Social Security Number
Step 4 — Sign Acceptance Package
The final stage of SoFi’s application process summarizes the loan agreement and requires borrowers to confirm which student loans it wishes to refinance. If the application is approved, SoFi will contact the borrowers so they can take the final step of signing the loan refinance application. At this stage, applicants can also setup automatic payments while they wait for a response. Those that agree to autopay receive a 0.25% interest rate saving.
Step 4b — Setup Your Autopay Agreement
SoFi Student Loans Review & Summary
How Is SoFi’s Student Loan Refinancing Better Than Other Lenders?
Simply put, SoFi provides lower interest rates and better terms than most other lenders. If you want to refinance your student loans and you have excellent credit, a good job, and a stellar employment history, you should probably start by applying for a loan with SoFi. Although qualifying is not easy—around 40% of applicants are flat-out rejected—there is nothing to lose because SoFi only does a soft credit pull and within five minutes you’ll know whether or not you will be approved. Consider applying for a student loan with SoFi as a free, no strings attached way to see just how good your credit is that could save you a small fortune in interest payments.