- - Extremely Low Interest Rates
- - Fixed Rate Plans Available
- - Job Placement Assistance
- - Zero Orignation, Application, and Prepayment Fees
- - Higher Income Requirements
- - Federal Loan Consolidation is not for everyone
In-Depth SoFi Review:
(Updated January 26, 2015)
If you are in the market for student loan consolidation or student loan refinancing, one company worth investigating is Sofi.
The bottom line on this company is that they are offering some of the best interest rates and most flexible terms. Though some of SoFi’s financing options do present a little cause for concern, their innovative approach and great rates make SoFi a good option for many borrowers.
How does SoFi work?
Before you consider using SoFi, it is important to understand what makes SoFi different than traditional lenders. SoFi was actually created by a group of Stanford business students who wanted to help other business students. Alumni invested in the program, and the funds were used to help recent grads lower their interest rates. The program started out just at Stanford, expanded to some other schools, included some other programs, and eventually became a nationwide program. This approach is commonly referred to as crowd-sourcing or peer-to-peer lending.
One of SoFi’s goals is for former borrowers to go on to become lenders. Even if you have no interest in future investments, the fact that the company seeks an ongoing relationship with its customers is a huge positive. Most student loan borrowers know that the customer experience goes down hill quickly one the lender has your name on the dotted line. Working with a company that has an incentive to keep you happy is a major upgrade.
What loans does SoFi offer?
SoFi presently offers student loan consolidation and refinancing services. Borrowers specify the loans that they want consolidated or refinanced, SoFi pays them off, and then the borrower pays off their debt to SoFi. The objective behind consolidation and refinancing is to lower your monthly payments by qualifying for a lower interest rate or by spreading out the payments over a longer period of time. Doing both of these things can save you money over the short term and in the long run.
SoFi offers both fixed rate and variable interest rate loans. The fixed rate loans start at 3.5% and have a maximum possible rate of 6.99%. Borrowers can sign up for 5, 10, 15, and 20 year repayment plans. The variable rate loans are presently as low as 1.92% to 4.92%, and they are tied to the LIBOR rate. The interest rate is capped at 8.95%. These rates are among the very best on the market, and the 1.92% rate is the lowest we have ever seen.
SoFi, like most legit lenders, does not charge any application fee, origination fee, or prepayment penalties.
What is the cause for concern with SoFi?
SoFi offers a service that some lenders do not provide. They are willing to consolidate federal loans with private loans. Though combining federal loans with private loans is a mistake for many, in some instances it is a good idea. The classic example would be high income earners with strong job security. The important thing for borrowers to realize is that the repayment plans and forgiveness programs of federal loans are eliminated upon private loan consolidation. Because there is no way to undo a consolidation it is critical to make a smart decision when weighing the federal perks vs. the lower interest rate on the private market.
If you are considering applying for consolidation with SoFi and want to make sure that your federal loans are not included, go to the federal student loan database. There you will be able to pull up a full list of your federal loans. If the loan is not on the list, you can be assured that it is a private loan.
Who is SoFi best for?
Due to the fact that SoFi offers such low interest rates, most private loan borrowers could likely benefit from their services. SoFi has a reputation for being one of the more difficult lenders to qualify for, so interested borrowers will need a higher credit score and a good income. However, the perk that comes with picky lending is low interest rates, and currently SoFi offers some of the best we have ever seen. To see if you qualify and to lock in a low rate, apply here.