SoFi Review: What to Know Before You Sign Up
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Ten years ago, there were few options for refinancing student loans. If you had student loans and were paying a high-interest rate, you were stuck with that rate.
Now, there are dozens of options for borrowers who want to refinance their student loans. SoFi is one of the most prominent of these. Their commercials have aired during the Super Bowl, and they even have their own sports complex – the SoFi Stadium in Los Angeles.
But consumers who want to use SoFi should understand if it’s a reputable company and if they can find lower rates elsewhere.
What Is SoFi?
Founded in 2011, SoFi is a comprehensive company offering a wide variety of financial services and products. While SoFi is not a bank, they do offer some banking solutions.
Initially, SoFi offered only student loan refinancing, but they pivoted into being a one-stop-shop for most of your financial needs. You can use SoFi to buy a house, take out a business loan, save for retirement, and even buy cryptocurrency.
They also offer holistic financial services that track your spending, monitor your credit score, and let you speak with a qualified financial planner.
Is SoFi Legit?
SoFi is a legit, reputable, and safe company. They have an A- rating with the Better Business Bureau and a 3.9 of 5 score on Trustpilot.
However, in 2018 the Federal Trade Commission alleged that SoFi overestimated how much borrowers could save by refinancing their student loans. SoFi failed to mention that many of its borrowers actually ended up paying more interest than if they hadn’t refinanced, mostly because they extended their loan terms.
When you sign up to refinance a loan, make sure you compare the total interest paid to ensure you pay less over the life of the loan.
What SoFi Does Best
Once you have a SoFi product, you become known as a SoFi member. This means you may be eligible for perks like free career counseling or discounts on other SoFi products. For example, if you refinanced your student loans with SoFi and want to buy a house, you may be able to get $500 off your closing costs.
SoFi Products and Services
SoFi has a wide swath of services, and potential customers should understand what SoFi offers and how it compares to other companies before signing up.
SoFi started out as a lender and offers a variety of lending products, both for new loans and refinancing options.
Student loan refinancing
SoFi’s original student loan refinancing services remain popular. Borrowers can refinance federal or private loans with SoFi, and there are no origination, application, or prepayment fees. SoFi offers both fixed-rate and variable-rate loans.
Current SoFi Student Loan Refinance Rates:
- Fixed: 3.20% to 6.29% APR (with AutoPay).
- Variable: 2.99% to 6.29% APR (with AutoPay).
When considering using SoFi for any type of loan, there are some things to be aware of. Since borrowers can view their interest rate before completing a full application, it results in a hard inquiry on their credit score and can potentially lower their credit score. Some reviews claim that the rates borrowers received during this stage were vastly different than their final rates. Others say that SoFi wanted a cosigner with them, while other lenders didn’t ask for one.
That’s why it’s important to get quotes from various lenders. Instead of only applying to refinance a loan with SoFi, make sure to compare multiple lenders. Apply with a few different lenders so you can compare quotes and get the best rates.
Medical resident refinancing
If you have medical school loans and are currently a resident, SoFi has special refinancing offers. Rates currently range between 3.75% and 7.16% APR for both fixed and variable-rate loans. Payments may be as low as $100 a month, and interest doesn’t compound while you’re a resident.
When your residency or fellowship program is completed, the loan will be re-amortized with a new monthly payment and borrowers can choose from term lengths of five, 7, 10, 15, and 20 years.
Parent PLUS refinancing
Parents who took out federal Parent PLUS loans have fewer repayment options than their children, but SoFi offers them a chance to refinance those loans as well. Current interest rates for fixed-rate loans range from 3.49% to 6.16% APR and variable-rate loans range from 3.5% to 6.16% APR. These figures include a .25% discount if you allow SoFi to withdraw the payment from your bank account automatically.
Private student loans
SoFi also lets borrowers take out student loans to help pay for school. They offer undergraduate, graduate, and parent student loans.
These are private student loans, which are different from federal student loans offered by the government. Private student loans have fewer protections and income-based repayment options than federal loans and should only be used if you’ve exhausted all federal loan, scholarship, and grant options.
As of May 2020, interest rates for undergraduate loans range from 4.73% to 11.46% for fixed-rate loans and 1.57% to 10.23% APR for variable-rate loans. Rates for graduate school loans range from 4.51% to 11.76% APR for fixed-rate loans and 1.35% to 10.55% APR for variable-rate loans.
MBA and law school borrowers will pay 4.41% to 11.67% APR for fixed-rate loans and 1.25% to 10.46% APR for variable-rate loans.
Parent student loan rates range from 4.73% to 11.46% APR for fixed-rate loans and 1.57% to 10.15% APR for variable-rate loans.
Interest rates vary with time so be sure to check the current rates for applying for a loan.
Borrowers who need to take out a personal loan can find low rates with SoFi. Rates range from 5.99% to 16.19% APR (this includes the autopay discount). There are also no origination, prepayment, or late fees, which means you’ll only repay the amount you take out plus interest.
The amount for a personal loan ranges from $5,000 to $100,000, which is one of the higher ranges for personal loans, and loan terms last between two to seven years
You can use SoFi personal loans for credit card consolidation, home improvement expenses, weddings, vacations, and engagement rings.
For most home loans, if you have less than 20% down payment, you’ll also pay private mortgage insurance (PMI). However, with SoFi, you only need to put down 10% to avoid PMI This also applies to jumbo mortgages, which refers to mortgages that are greater than the limits set by the Federal Housing Finance Agency.
SoFi offers the following mortgage terms:
- 15-year fixed-rate loan
- 30-year fixed-rate loan
- 7/1 adjustable-rate mortgage with a 30-year term
SoFi home loans are available in every state except for New York, New Hampshire, and Missouri.
Home loan or mortgage refinancing
SoFi also offers mortgage refinancing offers, including cash-out refinance and jumbo mortgage refinance. If you’re already a SoFi customer, you can get $500 off closing costs or off your mortgage.
To qualify for refinancing, you must have at least 10% equity in the home or 20% equity for a cash-out refinance.
Small business financing
SoFi offers small business financing options including Small Business Associate (SBA) loans, term loans, and lines of credit. Their website doesn’t say what kind of terms, interest rates, or total amounts are available; you have to apply for financing to see that information.
SoFi also offers some investing options both for those who are actively investing and those who want a hands-off approach.
SoFi’s automated investing program is similar to using a robo advisor. You input your age, income, and retirement goals, and SoFi recommends which funds to select. The minimum investment amount is $100. SoFi doesn’t charge any management fees and will rebalance your funds when necessary. They even let you have multiple goals with different savings strategies.
Unlike other robo advisors, SoFi doesn’t offer tax-loss harvesting to customers.
SoFi offers Active investing, which is designed for customers who want to buy and trade stocks regularly. This is supposed to be a competitor for Robinhood, an investing app that doesn’t charge any commission fees. Investors can buy cryptocurrencies and fractional shares with no fees per trade.
SoFi lets customers open traditional, Roth, and SEP IRAs. There are no minimum amounts and SoFi doesn’t charge a management fee. SoFi will choose the funds in the portfolio and you can speak with a SoFi financial planner about any other questions you may have.
Related: How and Where to Open an IRA
SoFi offers cryptocurrency trading and offers $25 worth of Bitcoin if you make a crypto trade worth $10 or more. You can trade Ethereum and Litecoin as well as Bitcoin. You do have to create a SoFi Invest account before you can start trading cryptocurrency and SoFi charges a 1.25% fee on all crypto trades.
SoFi partners with a few different insurance companies to provide life, auto, renters, and homeowners insurance. It’s not clear if you get a special discount or benefit on SoFi-sponsored policies if you’re already a, and it’s also not clear if you’ll get a better rate by switching. Still, it never hurts to compare insurance rates and quotes to see if you’re getting the best deal possible.
SoFi has recently launched money management tools to help customers understand how to budget and plan ahead.
Once compared to Personal Capital or Mint, SoFi Relay allows you to connect your bank, credit card, loan, and retirement accounts so you can track your spending habits all in one place. You can also monitor your credit score and set up a meeting with a financial planner.
This is a comprehensive financial planning system that’s available for free even if you’re not a SoFi member. The only downside is that SoFi Relay tries to get you to sign up for their own products, such as the SoFi Money cash management account or the SoFi investment account.
Like other financial planning services, you have to provide personal information including your Social Security number to get access to your free credit report.
SoFi Money is SoFi’s bank branch, but it’s not technically a bank. SoFi Money is a cash management system, but like a bank, you get access to a debit card. The debit card offers cash-back rewards, reimburses ATM fees, and doesn’t charge any monthly maintenance fees.
The money is transferred to a SoFi partner bank which means it is still FDIC-insured, just like a regular checking account at a traditional bank.
The SoFi Money system doesn’t charge overdraft fees and has no minimum balance requirement. It pays 0.2% APY on the money in the account, which is lower than most online savings accounts. However, it’s still higher than many traditional checking accounts.
Users can deposit checks via mobile app, receive free checkbooks, and pay bills through SoFi Money. They also offer free P2P money transfer services.
SoFi Member Benefits
People who use SoFi are known as members and receive special perks for being SoFi customers. For instance, they offer live networking and social events for their members with free food and drink included at the events. Another perk is unemployment protection, which allows you to defer payments in three-month terms, up to 12 months, if you lose your job.
You can also get help with financial and career planning.
Financial guidance and resources
SoFi offers free financial planning services to its members. The financial planners are all fiduciaries, which means they have a legal obligation to offer objective advice that benefits the customer. You can talk to them about topics like creating a budget, investing, or if you’re financially ready to buy a house.
SoFi says you can schedule a follow-up call if you have more questions, but it’s not clear if there’s a limit on how many times you can schedule a meeting with an advisor. This service is still a huge benefit to members because many financial planners charge hundreds of dollars just for one session.
SoFi members also get free access to Edmit Plus, a tool that helps students compare and learn more about the real cost of attending certain colleges. High school students can use Edmit to figure out which colleges offer the most aid and how to figure out which college actually costs the least.
SoFi’s career counseling program is free for SoFi members. They can help you create a resume, talk about changing careers, or learn how to negotiate a salary. This service is provided by Korn Ferry, a career development platform.
In a pilot test with 350 SoFi customers, there was a 96% satisfaction rating.
Who Should Use SoFi?
If you’re interested in refinancing a student loan or taking out a mortgage, you may find the SoFi process helpful. Plus, SoFi has a few amenities that other private student loan lenders don’t offer. Be sure to compare rates, terms, and total interest paid with other lenders to verify that you’re getting the best deal.
SoFi generally has high standards for its lenders, both in terms of income and credit score. If your debt-to-income ratio is high or your income is low, you may have better luck with another lender.
Customers interested in automated investing should try a dedicated robo advisor, which has more robust features. The SoFi Relay app is free to use and may offer insight, but if you already use Mint or Personal Capital, then this may be overkill.