Life Insurance

How Does SoFi Work

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 7 minute read

Private student loans may be extremely costly, making it difficult for even college grads to escape the financial burden of education for years after graduation. Furthermore, it is extremely difficult for debtors in financial need to get their student loans discharged in bankruptcy. The resulting financial effects might last for decades.

SoFi was created with the intent of altering this dismal situation. It debuted at the beginning of this decade with a refinancing product for student loans at over 2,000 U.S. colleges, and it uses peer-to-peer lending between members of the public and qualifying student borrowers.

With time, SoFi has broadened its scope to include not just personal loans and mortgages, but also asset management, life insurance, and a checking and savings account called SoFi Checking and Savings. While it is still very creative in many areas, it no longer places a strong emphasis on the peer-to-peer model.

Product Highlights

The following are some of the financial services and products that SoFi provides. Loan rates are based on a variety of factors, including your income and credit history as of the loan application’s submission date.

Refinancing Student and Parent Loans

Refinancing your private and federal student loans with SoFi might reduce your overall interest payments. Subsequently, it is possible to refinance student loans for undergraduates, graduate students, and parents of dependent students (Parent PLUS loans).

Any refinancing loan through SoFi must have a minimum principle of $5,000. The total amount of the loan being refinanced is the maximum principle that can be used. No origination or application costs are charged. The contract duration might be anywhere from 5 to 20 years.

Rates for refinancing loans from SoFi are tied to the London Interbank Offered Rate and fluctuate with market conditions (Libor). The maximum interest rate for a 5 year loan is 8.95%, the maximum for a 7 year loan is 9.25%, and the maximum for a 10 year loan is 9.95%; these rates are, of course, variable and based on your credit history.

Loans for Individuals

Loan amounts from $5,000 to $100,000 are available for 2 to 7 year repayment lengths through SoFi’s personal loan program with fixed interest rates. Variable rates between 6.99% and 14.99% APR are available. No origination or application costs are charged.

You may get a personal loan from SoFi without putting up collateral if you have high to exceptional credit. If you pay down your loan principal or pay it off early, you won’t be charged a prepayment penalty.

Loans for Homeowners

Homebuyers in 32 states can take use of SoFi’s mortgage lending services.

  • For 7 years, borrowers with a 7/1 adjustable rate mortgage (ARM) pay a fixed interest rate (currently at 4.816% APR), and then agree to annual rate increases. A minimum of 10% initial investment is necessary for this financing. For the first five years of the 5/1 interest-only adjustable-rate mortgage (ARM), you will pay just the interest accrued on the loan (currently at 5.168% APR). After the initial year, your rate will fluctuate yearly, and you’ll have 20 years to pay off the loan’s principal. A minimum of 25% initial payment is necessary for this loan. These ARMs have adjustable interest rates that cannot increase by more than 2% annually or 6% annually.
  • Fixed-rate mortgages are available with terms of 30 years at an interest rate of 4.928 percent (with as little as 10 percent down). We offer 15-year fixed mortgages with rates as low as 4.59% APR and down payments as low as 10%. For the duration of the loan, both the principal and interest are paid monthly. SoFi offers mortgage loans of up to $2.5 million, with no points or fees due at closing.
  • SoFi’s refinancing loans are conventional in nature, with an LTV cap of 80%. Both the fixed and adjustable rate options offered by SoFi for homebuyers apply here.
  • SoFi now provides cash-out refinancing loans with a maximum LTV of 65%. Both the interest rate and the payment schedule are the same.
  • SoFi’s student loan refinancing mortgage lets you take advantage of a reduced interest rate on your home loan while also using some of your equity to make principal or interest payments on your student loans. Up to 80% LTV is allowed.

Private mortgage insurance (PMI) is not required for any mortgage loan through SoFi, regardless of the size of the down payment.

Asset Management

Like Wealthfront and Betterment, SoFi’s SoFi Invest is a robo-advisor that helps clients manage their wealth. SIPC insurance protects account balances up to $500,000 per account type with a $1 initial investment requirement.

You can choose between a taxed and tax-free retirement account. Portfolios are rebalanced regularly and invested in a wide range of exchange-traded funds (ETFs) and other diversified financial instruments in accordance with your individual risk preferences.

Life Insurance

Ladder is an insurance company that works with SoFi to provide term life insurance to qualified SoFi customers in the United States. Terms for policies can be anywhere from 10 to 30 years. The level of the benefits (the amount of the insurance) might be anything from $100,000 to $8,000,000. Pricing based on policyholder characteristics (risk), policy duration, and total benefit amount.

SoFi Savings and Checking

The SoFi Checking and Savings Account combines the advantages of traditional deposit accounts with those of savings accounts and cash-back credit cards, resulting in a high return deposit account.

SoFi Checking and Savings offers no recurring fees, period, and the variable return on all accounts (1.80% APY) is consistently among the top in the high-yield savings category. Not just that. The SoFi Checking and Savings account also has the following perks:

  • FDIC insurance on qualified balances
  • Complete mobile capability
  • Accounts for domestic partners and couples who have pooled their money.
  • Rapid P2P file sharing.
  • Flexible spending and budgeting instruments.

Users of the SoFi Checking and Savings Account are under no obligation to apply for loans or insurance products offered by SoFi.

Additional Benefits

The following are some of SoFi’s supplementary capabilities.

Career Guidance

In-depth career coaching services are available to both current and past SoFi members through the Career Services team. Career counseling may take many forms, including support with finding and applying for jobs, guiding through a shift in careers, training and education, and even building a personal brand.

Program for Referrals

If you know of any of your friends who might be interested in SoFi’s services, you can provide them with your own referral link. You will receive $300 for each person you suggest who goes on to establish their first loan with SoFi.

New borrowers who join SoFi through a referral link are eligible for a $300 incentive at this time, however this bonus amount is subject to change. Over a 12-month period, you may earn a maximum of $10,000 in welcome and referral incentives.

Unemployment Insurance

If you lose your job and can’t make your monthly loan payments, SoFi may temporarily suspend them and assist you network with other borrowers, investors, and alumni to find a new career.

Every three months, you will need to reapply for this program. Over the course of the loan’s lifetime, SoFi only allows for a 12-month payment hiatus. Interest on your loan will continue to accumulate during the suspension period and will be capitalized at the end of the period (added to the principal).

You need to meet eligibility requirements for federal unemployment benefits in order to qualify for Unemployment Protection. SoFi’s Career Services team will help you locate a new employment and is essential to your continued participation in the program. One or both of the people listed as cosigners on the loan application must be currently jobless.

Discount for Autopay

Your SoFi loan’s effective interest rate will be reduced by 0.25% when you enroll in and maintain automatic debit payments (autopay). If you have a loan that was initiated at 6%, for example, the rate will reduce to 5.75% if you enroll in autopay.

Member Discount at SoFi

Borrowers who keep their first SoFi loan in good standing may be offered a rate discount of 0.125% on their second (and subsequent) SoFi loans. Your business might save you thousands of dollars in interest over the life of your loan if you have previously refinanced your student loans and are now ready to buy a home.

Do You Qualify for a SoFi Loan?

Applicants for any type of SoFi loan must fulfill these standard requirements:

  • Citizen or permanent resident status
  • At least 18 years old
  • There have been no bankruptcies in the last three years.
  • Currently working or have a contract to work in the future

When deciding whether to provide a loan, SoFi also applies stringent underwriting procedures, the details of which are kept confidential. You should not be qualified for any federal loan forgiveness programs, have a credit score of at least 700, and have a debt-to-income ratio that is manageable if you want to increase your chances of getting approved. Nonetheless, “moderate” isn’t defined in any obvious way by SoFi. You need to have completed at least four years of college, or be close to finishing one.

Bottom Line

More and more people are turning to SoFi to consolidate their debt, whether it be from college loans, a mortgage, or a personal loan. Although your actual loan cost is determined on your credit history and the amount you borrow, our rates are lower than those of many of our rivals.

In addition, clients receive benefits that are unavailable from conventional loan providers, such as access to professional networks and help in the job-seeking process. It combines the functions of a financial advisor, a loan officer, and a career counselor.

SoFi has recently branched out beyond its traditional consumer loan business into the wealth management and insurance industries. Being a member of SoFi right now is really cool.

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