Social Finance Inc., known as SoFi, is a 4-year-old lending company planning to revolutionize the banking industry. Within a few minutes, the SoFi app lets you qualify for lower-than-average interest rates on student loans, refinance your existing loans and get mortgages entirely through your smartphone.
SoFi itself is not a bank. In fact, the firm aims to be more financially reliable than a bank by keeping its loan-default rate at an incredible "less than two basis-point, 0.02 percent, annual default," according to an interview with SoFi CEO Mike Cagney for The Wall Street Journal.
The future of SoFi looks especially bright since the news of the Japanese SoftBank Group Corporation investing $1 billion in SoFi in 2015 after valuing the enterprise at almost $4 billion. The real question is: Will it work for you?
How Does the SoFi Lending App Work to Replace Bank Loans for College?
Applying with SoFi is extremely easy, and most users completed the online application in five minutes or less, cited in a third-party review on MrMoneyMustache.com. You provide your income details, employment information and current educational status. Then you select your university from a list of approved schools.
If your school doesn't show up on the list, then you probably won't qualify. However, users on TheBillfold.com report that SoFi has been expanding its list of qualifying schools, so sometimes it's worth trying to apply again later.
Next, submit a scanned copy of your diploma or other documents and give the details of your existing loan. SoFi will verify all the data and get back to you shortly. Best of all, you'll find that both SoFi loans and mortgages have no extra origination fees. One user from MrMoneyMustache.com describes from his own experience how:
"Their 10 percent-down mortgages also require no private mortgage insurance, which could provide a massive savings in certain cases ... The most interesting part to me is that you can then slide your loan amount and down payment back and forth to strategically get the best rate for your own situation."
SoFi's co-founder Dan Macklin described how the company decides who to approve for loans on NerdWallet. Here are the main criteria:
When SoFi Is a Great Refinancing Option
- If you currently have a low credit score that doesn't reflect your earning potential. That's because SoFi has no defined minimum credit score to qualify applicants for a loan.
- If you made all your previous loan payments on time so far.
- If you receive a steady income that's enough to easily cover both your loan payments and living expenses.
- If you need financing for up to $100,000 at fixed or variable interest rates.
Additionally, SoFi's Unemployment Protection program allows you to pause payments and help you find a new job through its career-counseling service.
When SoFi Probably Won't Help You
- If you're already struggling to make ends meet with your current income.
- If you have an irregular employment history.
- If you work in an industry that has a tendency toward unstable income.
- If you've ever defaulted on a loan in the past.
As explained further in a report by The Wall Street Journal, SoFi has the right to be selective in choosing its customers since SoFi isn't a Federal Deposit Insurance Corporation bank. Instead, the Consumer Financial Protection Bureau monitors SoFi.