One of the hot newer companies on the lending and investing scene today is SoFi.
SoFi only launched in 2011, but it’s already taken the lending world by storm. With the tagline “Save, Invest and Earn with SoFi,” the company already boasts 250,000 members and gets solid reviews all over the internet.
So, what’s the real story behind SoFi? Can they really deliver a better way for customers to save, invest and earn?
What does SoFi Do?
SoFi focuses on two areas of finance: lending and wealth growth.
Through SoFi’s lending arm, you can fulfill a number of borrowing needs such as mortgage purchase or refinance, personal loans, student loan refinancing and Parent loans along with Parent PLUS refinancing.
SoFi’s other half offers wealth management and investment advice for all levels of investors. By focusing on both the borrowing needs and the wealth building needs of clients, SoFi can reach a broad number of clients and help people on both ends of the money spectrum.
How does SoFi differ from other lenders?
One thing that really stands out about SoFi is their commitment to client care and customer service. Their goal is to build a community within their membership, and they carry that vision out by hosting regular SoFi community events in major metropolitan areas.
They also offer a pretty attractive referral program, paying out $300 in cash for member referrals who take out a personal or student loan with them.
SoFi offers an active community forum and shares customer stories on their website as well.
From a financial standpoint, SoFi has competitive rates on loans. Currently their personal loan rates vary between 5.70% and 14.24% for a fixed loan and they are a bit less than that on variable loans.
They also differ from many lenders in that they do not charge lender or origination fees on any of their loans – not even on their mortgages. The only time they might charge a fee is when a client makes late payments.
The one potentially negative difference we found in their mortgage loan guidelines is that they have a minimum down payment requirement of 10%, whereas many lenders have a 5% minimum down payment requirement. A benefit that offsets the higher minimum down payment requirement, however, is that SoFi doesn’t require their customers to carry private mortgage insurance (PMI). This one benefit alone could easily save mortgage borrowers hundreds of dollars per year.
Another potential con with SoFi is that they do have pretty strict lending guidelines. You may have trouble getting approved if your credit is not great.
Also, SoFi does not accept cosigners. In other words, if you can’t qualify on your own merits, then you can’t use SoFi. If you are in a situation where you have a lower credit score or late payments, a company like Credible might be a better choice for debt consolidation or refinancing.
Applying for a loan with Sofi is easy. You simply fill out a standard loan application online and hit the “send” button. They do require standard verification docs such as your most recent paystubs and photo identification, but those documents can be sent electronically.
SoFi also offers quick loan application decisions, along with fast disbursement of loan funds. In fact, they can wire funds to your bank account within hours of your electronic signature.
SoFi’s borrowing process is relatively easy and painless, and their rates are very competitive for those looking to borrow or refinance money. I’d suggest checking out your local credit union as well though to see how SoFi’s rates are in comparison.
SoFi’s investment services
As I mentioned before, SoFi also offers investment and wealth management services. They boast no account opening, closing or trading fees, along with reasonable fees for investment management services. Wealth management is absolutely free for SoFi borrowers, and non-borrowers pay a variety of investment management fees based on which type of services they choose.
You can invest your first $10,000 free with SoFi. After that, you’ll pay 0.25% annually if you use their robo-advisor services, and 1.3% annually if you use a traditional advisor; i.e. a live person.
SoFi says they’ll help you build wealth by assisting you in defining your financial goals, and then selecting an investment mix based on those goals. And since they don’t pay their advisors commissions, you don’t have to worry about commission-based investment advice.
They also claim that they build their portfolios from a broad mix of ETFs that follow over 20 indexes investing in U.S. stocks, international stocks, high-yield bonds, real estate, short-term Treasury bonds and a variety of domestic and global stock markets.
The future of SoFi
Having raised an additional $500 million dollars last year via private investors, SoFi is currently valued at $4.3 billion, although it has no intentions of going public at this time.
Instead, the goal of SoFi is to help SoFi service clients better by offering additional personal finance tools and to expand its target audience. Currently SoFi only lends to U.S. citizens, but is planning to expand to Canada and Australia by the end of 2017.
So is SoFi worth checking in to? I’d recommend it for both those who are looking for ways to pay off debt faster by paying less interest, and to those who are looking to grow their wealth through investing via low-cost options. Investing on SoFi’s platform is especially great for people that have borrowed money from them.
So far, SoFi has proven their claim that they want what’s best for the client; a solid lending and investment company that works to increase its own financial stability while it helps its clients do the same.
Editorial Note: Opinions expressed here are author’s alone, not those of the companies mentioned, and have not been reviewed, approved or otherwise endorsed by any of these entities.