November 11, 2016

SoFi Personal Loan Review

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SoFi personal loans can help you out when you're drowning in debt. But is it a good idea? Read on for the pros and cons.

A SoFi personal loan can be used when you need to pay off a bunch of big bills that are weighing you down. You could also use it as an infusion for a big purchase, like a honeymoon, but that's not recommended.

Getting a Personal Loan for Credit Card Debt

Are you swimming in credit card debt and need help? Are you searching for a lifeline for your debt and shopping around for the right solution? For most people, a balance transfer is the most effective way to streamline credit card debt, but others may view SoFi as the solution.

Proceed with caution, though. Although personal loans can be tempting, they should only be sought if you can afford the monthly bill and the interest that comes with the privilege.

Another big warning: Get the wrong loan and it can sink you fast.

Here's what you need to know about getting a personal loan through SoFi. We'll start with the positives and also highlight some reasons to steer clear.

Want a Personal Loan? 10 Reasons to Use SoFi

Wondering what kind of features and benefits SoFi has to offer? Here's what you can expect.

  1. You'll get a competitive rate. Compared to other personal loan lenders, SoFi's rates are some of the lowest around. That's a major plus if you're trying to score a better deal on your credit card debt or finance a big purchase.

  2. You can borrow just a little or a lot. With most online lenders, the personal loan borrowing limit is capped at $35,000. With SoFi, you can borrow as little as $5,000 or as much as $100,000.

  3. You won't pay unreasonable fees. Between application fees, origination fees and closing fees, getting a personal loan can cost you an arm and a leg. Fortunately, SoFi doesn't tack on any of these expensive extras.

  4. You'll be offered flexible loan terms. Typically, you get 3, 5, 0r 7 years to pay back what you borrow on a personal loan. With SoFi, you can take as many as 7 years to clear your debt.

  5. You can get a discount on your rate. If you sign up for auto payments, with your monthly payments getting pulled right out of your bank account, SoFi will cut your rate by 0.25%. That may not seem like much at first, but it can add up to big savings over the life of the loan.

  6. You can get free money. If you know someone who needs a personal loan, SoFi will pay you 100 bucks for referring them if they are also approved for a loan. There's no limit on how many people you refer, so you can snag some serious cash just by telling people about the company.

  7. You can get help if you lose your job. What's one of the first things to worry about if you get laid off? Your bills. For this loan, anyway, you can get a break. If you become unemployed, SoFi will put your loans in forbearance for up to 12 months and help you out with career counseling in the meantime so you can find a new gig.

  8. You don't need collateral. SoFi personal loans are unsecured, meaning you don't have to put up property or other assets to borrow. This makes dealing with SoFi less risky than with lenders that demand you do agree to give up certain assets if you become unable to pay.

  9. You can choose a fixed or variable APR. SoFi personal loans come with a fixed or variable APR, based on your preference. Just remember that a variable APR is riskier; the interest rate can change and go higher if the index the rate is tied to goes up. If it does, you'll end up paying more in interest over time.

  10. You can use the money for just about anything. SoFi doesn't put tight restrictions on how you can use personal loan funds. That means you can get a loan to consolidate your debt, pay for your dream wedding, or put a new roof on your house.

3 Reasons to Consider a Different Lender

The 10 reasons we just listed make a SoFi personal loan sound pretty good, but it's not going to be the best choice for everyone. Here are 3 reasons why another lender might make more sense.

  1. Loan funding takes time. While SoFi's application is all done online and takes just a few minutes to give you the OK, underwriting is a slower process. Unlike some online lenders that can fund loans the same or next day, SoFi can take up to a week to get the money to you.

  2. Borrowers need to meet high standards. SoFi is on the hunt for high-quality borrowers, which means they're going to put your credit history and income in the spotlight. Compared to other lenders, the bar is set fairly high, so if your credit is iffy or you're not making a lot of money, you may have a harder time getting approved.

  3. Co-signers aren't accepted. SoFi allows co-signers if you're refinancing student loans, but not for personal loans. This can be considered a plus (if you don't want to risk someone else's credit when you're looking for loan) or a detriment (this is one indication that SoFi may have higher lending standards than other lenders).

Compare Your Options

Compared to a balance transfer, consolidating your debt with a SoFi personal loan may make sense for a couple of different reasons. For one thing, there are no fees. Typically, credit card companies charge a 2%-3% fee for balance transfers, which only adds to your debt. With SoFi, a fee like that is not tacked on.

So, is a personal loan always better than a credit card balance transfer? It depends on how much you need to consolidate and how long you need to pay it off. You can easily find credit card companies that will take on your debt, interest free, for a limited time. If you can pay off what you owe within the promotional offer (generally 6 months to 1½ years), you could save a lot of money on your credit card debt. But the risk is if you don't pay it off by then, you could be stuck with a super-high APR.

On the other hand, a personal loan from SoFi will charge you interest from day one, but you have the advantage of stretching out the loan term. You may find that to be a less stressful option. And you may find it possible that you'll pay less than you would with a balance transfer.

For example, let's say you have $25,000 in credit card debt to consolidate and SoFi offers you a personal loan with a 5-year term and a fixed 7% APR. The alternative is a 0% interest balance transfer for 12 months, after which a regular APR of 15.99% applies. What are the chances you'd be able to pay off that debt within 12 months, interest free?

Why a personal loan makes sense: If you took SoFi's offer and made payments of $500 a month, the loan would cost you around $4,700 in interest. Now, if you went with the balance transfer instead and made the same monthly payment over a 5-year period, you'd spend close to $6,800 in interest before it's all said and done. That doesn't include the balance transfer fee.

When you do the math, it becomes clear that for some borrowers at least, SoFi is the more cost-effective option.

SoFi Loan Rates

You've got some flexibility as far as the loan terms go, which is great if you need a longer time frame to pay it off. Currently, SoFi offers personal loans with repayment terms of 3, 5, and 7 years.

How SoFi is different: While some online lenders like to pile on the fees, SoFi doesn't do that. There's no application fee or loan origination fee and no prepayment penalty if you pay it off ahead of time. SoFi does charge a fee when your payment is more than 15 days late, which is the lesser of 4% of the payment due or $5.

Personal Loan Calculator

Personal loan calculators can come in handy if you want to get an idea of how much interest you'll pay over the life of the loan or how increasing your payment speeds up your payoff. Unfortunately, SoFi doesn't offer this feature for personal loan borrowers.

There is a tool for calculating repayment of student loans, but you'll have to look elsewhere for one that lets you plug in the numbers for personal loans.

Personal Loan Requirements

Before you go through the application process, you'll want to make sure you meet all of SoFi's eligibility criteria. All borrowers have to be U.S. citizens or permanent residents, and you must be the age of majority (at least 18 or 21) in your state.

You also have to be working. As part of the underwriting process, SoFi will take a look at your overall employment history, what kind of money you're making, and how your income stacks up against your monthly expenses. SoFi also reviews your overall financial history to see how good you are at saving and paying your bills.

The last eligibility requirement has to do with where you live. At the moment, SoFi offers personal loans in 47 states and the District of Columbia. If you live in Mississippi, Nevada or Tennessee, you're out of luck.

Credit Score

SoFi offers some pretty generous lending terms, but they don't just hand out personal loans to anybody. Aside from the requirements mentioned above, you also have to prove yourself worthy of a loan based on your credit history.

If you have a history of paying all your bills on time and you're not carrying a huge amount of debt, you'll likely be a good candidate for a loan. On the other hand, if your credit report is littered with late payments or collection accounts, or you're close to maxing out your total credit line, it might be difficult to meet SoFi's credit standards.

SoFi Personal Loan Application Process

SoFi's loan application process begins with getting your rate quote online. To do that, you'll need to create a login using your email address and a unique password.

Once you're logged in, choose the personal loan link on your account dashboard to get started. Next, plug in your name, address, phone number, date of birth and citizenship status. You'll also have to check off whether you rent or own your home and fill in information about your education, employment and income.

The last step is telling SoFi what you plan to use the money for and agreeing to the rate check terms. Getting your rate only counts as a soft pull against your credit at this point, but a hard pull will show up if you actually take out a loan.

Once SoFi tells you what kind of loan terms you qualify for, the next step is formally applying. At this point, you'll have to upload supporting documents to verify your identity and income. SoFi uses electronic deposit to disburse loans, so you'll have to give them your bank account information as well. The last step is signing the acceptance packet online, which finalizes the loan.

It's easy: According to the SoFi website, it takes borrowers about 15 minutes to get a rate quote, fill out the online application, upload documents and sign the final loan agreement. Once that's done, you'll have the money within a week or so.

Bottom Line

SoFi is worth considering if you've got a spotless credit history and a steady income stream. The rates are extremely competitive and the lack of fees just adds to the money you can potentially save. Be sure to check your credit report and score before applying for a personal loan with SoFi to gauge whether you'll be able to qualify.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

Rebecca Lake is a journalist at CreditDonkey, a credit card comparison and financial education website. Write to Rebecca Lake at rebecca@creditdonkey.com. Our data-driven analysis has been recognized by major news outlets across the country and has helped consumers make savvy financial and lifestyle decisions. (read more)

Disclaimer: Opinions expressed here are those of the author's alone. Please support CreditDonkey on our mission to help you make savvy financial decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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