Sofi Review 2019: What Is Sofi? How Does Sofi Work?

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Brian Roberts

May 8, 2019  •  8 min read

There’s a lot to love about Sofi, as you’ll discover in this SoFi review. With over $30 billion in funded loans and over 600,000 members, it’s obvious they’re doing something right. So, how does Sofi work?

Sofi connects people who need to borrow with people willing to lend.

The end result is a platform that provides credit while paying less attention to your credit score and credit history.

It’s a nice break from traditional banking. For borrowers, SoFi is a way to  consolidate loans, get a personal loan, or just get a better interest rate.  For lenders, it’s a way to use your money to make a return on investment while doing good.

And, in this post, we’ll be talking about everything Social Finance, better known as SoFi. From the application process and the best Sofi offers, to if they charge origination fees (hint: they don’t) and how the loan application works (hint: it’s easy).

Sofi Review Summary

Here’s the quick and easy version.

The the minimum loan amount starts at $5000 and tops out at $100,000.

There’s no prepayment penaltieslate fees or… well, fees of any kind.

Depending on the kind of loan you get, the funds can hit your bank account anywhere between 24 hours to 30 days later. Just enter your checking account information to connect SoFi with your financial institution.

Both fixed rate and variable interest rates are available, as well as extra features that help Sofi stand out amongst all the online lenders. These include competitive rates as well as unemployment protection, and free financial advising and rate discounts.

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Good credit and a responsible financial history will get you access to top-tier loan rates. Whether it’s a Sofi personal loan for home improvements or debt consolidation,

SoFi started as a way to help with a student loan, and has blossomed into a diverse assortment of lending products. All with no fees. Not even late fees! If you’re a permanent resident or U.S. citizen, you can apply. But wait. Is SoFi safe?

If the above hasn’t got you convinced yet, note they’re also licensed by the Department of Business Oversight under California Financing Law License No. 6054612.

The Story of SoFi

The vision the founders of SoFi had was to create a tool to help students pay off student loans (with no fees).

Banks often make personal loans with low interest rates, but they only to those who are sure will pay the money back. They restrict their credit to borrowers who already have a lot of money or a high credit score.

Students tend to have low credit scores and no wealth because they have borrowed to pay tuition, and often do not have a job yet. As a result, students have no choice but to borrow money at the government rate.

The innovation of SoFi was to open up the possibility of school alumni lending money to current students. This would provide those students with a lower interest rate on their loan. And make it significantly easier to pay the money back.

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SoFi would screen for people likely to pay the money back with information about their financial past.The concept was a great success and SoFi expanded quickly, raising money from new investors to cover more schools.

Eventually SoFi broadened its business from student loans to general personal loans and even mortgages. Today SoFi is a large company with many lenders and borrowers all across the country.

SoFi is a leader in the peer lending industry.

This business model offers personal loans on a person-to-person basis. As opposed to the traditional approach where people borrow from banks. People who have short credit histories or other credit issues often have problems getting traditional loans.

However, SoFi can connect them to lenders that don’t look at credit reports. How Does SoFi Work?

SoFi is based around helping people restructure their existing debt. That started out as student loans, but now they offer services to help with credit card debt and other personal debt. As the company grew, it has added more services. Some of these include wealth management advice, and job search assistance.

In order to work with SoFi, you have to inform the company of the debt you want to restructure, and some personal information. This is so that SoFi can ensure you will pay back the money.

Sofi will ask about your 1) income, 2) job status, and 3) education.

They will also ask you about your history with money and some other data. This is less invasive than a credit report. However, it should be noted that SoFi may not want to offer you a loan based the information provided.

If you want to consolidate credit card debt or student loans, then SoFi will work to offer you a loan with a lower interest rate. Once you sign the agreement for the new loan, they will pay off your old debt and create the new loan to replace it.

As with any loan, having excellent credit and a strong financial history will get you the best interest rate.

Personal Loans

If you want a personal loan, you won’t need to document existing debt or have SoFi pay it off. But, you may be asked about your plans for the money. This information could affect whether you get approved. Reading SoFi reviews shows that those who do get approved are generally happy with the service.

SoFi loans rates are significantly lower than rates on student loans or credit cards.

On top of that, the side services like job placement seem to have real value, and aren’t just marketing.

Loan Consolidation

If you are thinking about using SoFi for loan consolidation, then you should read about what that would mean for your loans. This is especially true for student loans. Federal student loans tend to have special properties, like the ability to defer payment temporarily or loan forgiveness under special circumstances.

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If you choose to consolidate, you may lose those benefits. This is more likely if you are consolidating federal loans with private loans. Consult with the loan officer in charge of your student debt if you have questions about what consolidation might do.

The rate that they offer you will depend on the amount you need to borrow, the length of the loan, and your financial background. SoFi also offers two different types of rates. One is a fixed term. It will keep the same interest rate for the whole loan.

The other is variable term. The interest rate in a variable-rate loan can change based on the LIBOR rate. The LIBOR is a rate in financial markets that is used as a benchmark for many types of loans.

If the LIBOR goes up, the interest rate on your SoFi loan will also go up, and vice versa.The variable-rate loan can lead to you paying either more or less interest on the loan depending on where the LIBOR goes as you continue to make payments.

From a dollars and cents perspective, choosing SoFi makes sense if you can get an approved loan with a lower interest rate than you are currently paying.Just a few percentage points of difference can mean that you save thousands of dollars over the course of a large loan.

Additional Benefits

If you sign up for a 10-year student loan consolidation, SoFi will eventually start to ask if you want to sign up for their brokerage, investment, or career services. While these services might not be useful right away, you may want them as you near the end of paying off your debt and have advanced in your career.

For SoFi, the ideal customer will come to them to get help paying off a loan and then stick around to invest with them after the loan is paid. They have an incentive to provide good customer service because they want to move you into their other services over time.

SoFi is not the only company that provides these kinds of services. Low-cost or no-commission brokers are becoming more popular. As is automated investing.

Unlike with other companies however, you have the advantage of getting to know the SoFi as a company for a while before you choose whether to use the other services. That said, you should not think too much about the extra services when considering loan consolidation. The biggest priority should be getting a lower interest rate. Anything after that is a bonus.

Sofi Review Summary

SoFi reviews indicate that they do provide good rates if you can manage to get approved. Bottom LineSoFi has become a major player in the loan consolidation and personal loan industry. Their business model is to help people get access to lower-interest loans without going to a bank. Then they can transition some of their customers to other services like investment.

If you are struggling with the burden of high-interest loans, or you are interested in a personal loanSoFi might a good choice. Getting approved for a SoFi loan is a significant obstacle. Because they don’t use traditional credit reportsSoFi can be aggressive about the requirements for income or repayment history.

But, if SoFi does approve you for a lower-rate loan, then you can save money on interest. That alone makes it worthwhile before even considering the other services. Make sure to do your research if you are consolidating student loans, however.

You might lose access to special benefits and programs. Consider whether losing those is worth the interest savings. Social Finance is popular for a reason- the loan terms they offer are favorable and their customer service is good.

At the very least, you should apply and see if they will approve you for a loan and what the terms would be. That way you can compare their offer to what you have now. You’ll be able to see what your savings would be before deciding whether or not to accept.