The recent milestone achieved by SoFi leaves no doubt that fintech is on the rise and is transforming the lending industry in front of our eyes. With its announcement that its members have cumulatively paid off more than $5 billion in credit card debt through the use of its personal loans, SoFi is quickly becoming the face of the burgeoning alternative lending space. It is doing so partly by offering a low-cost financing alternative for people who want to get out from under mounting credit card debt; but it is also doing it in large part because it is becoming known as a lender with a heart.
Leader in Student Loan Refinancing
Founded in 2011 by Mike Cagney, a former senior vice president at Wells Fargo and hedge fund manager, SoFi (short for Social Finance) has been on an upward trajectory ever since. It first came to prominence through its innovative student loan refinancing program which is the first to offer refinancing for both private and federal student loans. It also offers refinancing for Parent Plus loans. SoFi then made a big move into unsecured personal lending, offering personal loans for up to $100,000. Although its personal loans can be used for just about any purpose, SoFi says that 70 percent of its members report using them to consolidate high interest credit card debt.
Highly Competitive Personal Loan Products
Like most of the top online-only lenders, SoFi offers a quick and easy application process with near instant approval. Loans are funded within seven days. SoFi offers flexible loan terms – from three to seven years – as well as flexible repayment options. If you are laid off from your job SoFi offers a forbearance option that suspends your loan payments for three months at a time for up to 12 months. SoFi also offers both a fixed rate and variable rate loan option.
A SoFi personal loan is not for people with bad credit or spotty cash flow. In fact, to qualify you need at least a 660 credit score, but you won’t qualify for its lowest APR unless your score is over 700. However, SoFi also factors in your income or free cash flow, so if you have bad credit or no credit you can still qualify for APRs up to 14.24% percent. The average APR for a three-year loan is 8.5 percent. SoFi doesn’t charge loan fees.
Become a Member of the Club
All of that is very good and makes SoFi a top competitor in the personal loan space. But its surging popularity can also be attributed to how it treats its members. That’s right, when you take out a loan with SoFi you are not just a customer, you become a member with access to a number of perks and resources. SoFi offers career counseling, member-only networking events, member dinners, and other social events all around the country. SoFi wants to make money selling loans, but it is just as intent on empowering its members to achieve financial independence.
That’s why it is especially pleased with its newest milestone – $5 billion in credit card debt paid off using its personal loans – because it campaigns on helping its members get out of debt faster. SoFi reports that its personal loan borrowers have been able to reduce their effective interest rate by an average of 42 percent, with a resulting average credit score increase of 17 points (click here for more details).
Nowhere to Go but Up
On a company-wide scale, SoFi is growing in leaps and bounds. In 2016 the company originated $8 billion in new loans — an increase of 40% over the prior year. It also more than doubled its member base to 225,000 in the same period. With its latest round of financing in February 2017, SoFi raised $500 million in Series F financing which brings its total equity funding to $1.9 billion. SoFi plans on using the money to expand its offerings and its geographical reach into Australia and Canada within the next year. SoFi is also working on the rollout of a range of products and services including mobile deposit, credit and debit cards, and payment products.
So far everything SoFi has touched has turned to gold and it doesn’t look like it has any plans to stop until it has each of its members on the road to a better financial life.
Author: Jeff Gitlen
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