SoFi Peer to Peer Lending
SoFi, which is short for Social Finance, is a peer-to-peer lender that provides a variety of loans. However, most of the company's efforts are specifically geared towards those with student debt. Founded in 2011, SoFi is one of peer-to-peer lending's top five lenders and the company has founded $1.75 billion in loans since its inception.
The three primary loans SoFi offers are personal undergraduate loans for students currently enrolled in school, personal graduate loans for students of all qualified graduate programs and private student loan consolidation for both federal and private college loans. However, the company does offer mortgage loans as well to those who are eligible.
SoFi touts that its student refinancing can save borrowers up to $14,000. Its website offers a simple application process for borrowers to complete and customer service available seven days a week to address any question that might arise.
To qualify, students can be from any state aside from Nevada. In addition, SoFi doesn't offer variable rate loans for residents in Tennessee or Ohio. Along with residency requirements, students must meet the following criteria for eligibility:
- You are of legal age to enter into a binding contract and have U.S. citizenship.
- You have earned your degree from Title IV accredited colleges.
- You are working or have an agreement to begin work within 90 days.
- You must not have declared bankruptcy in the past three years
- You must not have been convicted of a felony
- If you are applying from a law program, you must have passed the bar and be licensed
SoFi does offer many benefits for those looking to refinance their student loans and personal loans. For one, the application process is simple to complete. From there, they use a unique underwriting process by weighing four factors: your employment history, income, credit rating and education, to determine rate.
Unlike other lenders that weigh credit history first, SoFi places the most emphasis on education, income and employment history. SoFi believes that college graduates, despite a poor credit score, are more responsible borrowers. This criteria can help borrowers receive a more favorable rate compared to traditional lenders. And SoFi's rates are among the best a borrower can hope to find. SoFi offers loans ranging from $10,000 to $65,000 with interest rates ranging from 5.5% to 9.0% APR.
But if you set up AutoPay, SoFi's rates are even lower. With AutoPay, borrowers can receive interest rates as low as 4.05% to 8.30% APR. SoFi offers repayment terms that range from five, 10 and 15 years, which allows some flexibility since most lenders only offer 15-year terms. What isn't typical is their approach to repayment. SoFi does not charge origination fees nor does the company charge prepayment penalties. So borrowers can feel empowered to pay their loans ahead of schedule in order to save money which would have been spent on interest.
SoFi offers variable and fixed-rate loans. Variable rate, private student loans are capped at a maximum of 10%, which is substantially lower than cap rates of traditional college lenders. This means that during the life of the loan, the variable interest rate cannot surpass 10 percent.
The variety of SoFi's term options is a convenient as it allows flexibility in repayment. Because there are different base interest rates designated to each of the terms, those who aren't borrowing much more than what is offered by traditional lenders may prefer bypassing those lenders altogether.
When examining the potential drawbacks of choosing this service, the biggest thing that stood out was their emphasis on employment and income during the underwriting process. This can work to your advantage if you receive a great job out of college. However, if you don't, then you might not qualify for their best rates.
In addition to their unique underwriting process, SoFi has the distinction of putting their customers first. They received an A+ rating from the Better Business Bureau.
SoFi's website includes an informative frequently asked questions section which elaborates on the differences between itself and traditional lenders. The FAQ section also helps borowers to find answers to common questions that students and parents may have regarding their loans. And If you are looking for detailed answers, SoFi provides customer service seven days per week which gives you ample opportunity to contact them.
But that isn't the best way in which SoFi provides excellent support to its borrowers. SoFi has an unemployment protection program which is unmatched by any of its competitors. So, if you were to lose your job while repaying your loan, the company will defer your payments until you have secured a new job. Furthermore, SoFi also has a reemployment assistance program which helps its borrowers in their search for new employment.
Moreover, the company offers career support programs which are also unique to SoFi. SoFi offers complimentary services to enhance their borrower's employment opportunities. These programs include complimentary interview coaching, resume reviews and networking tactics. However, there is one feature that SoFi doesn't offer that most traditional lenders do which is a cost calculator.
SoFi also offers excellent services to its lenders. To invest, the company requires that potential lenders be accredited investors. Furthermore, SoFi requires a minimum of $10,000 in order to invest. Accredited investors must earn at least $200,000 in individual annual income or $300,000 in combined household income for at least the previous two years.
Prospective lenders do not need to be a graduate of one of SoFi's member schools or a previous borrower in order to invest. Once approved, lenders are given a private prospectus which details term lengths, conditions, rate of return and several other pertinent aspects of being a lender. SoFi also does not publicly disclose expected return rates publicly, but prospective investors can expect annual returns of 4% to 8% annually.
Verdict - Superb
Overall, SoFi takes a different approach to refinancing student loans. This approach places greater emphasis on a borrower's employment and income, which can be beneficial or a detriment depending on their job situation.