Two well-known players in the student loan refinancing market are SoFi and CommonBond. Both of these companies are targeting borrowers who are graduates with good credit history and income who are eligible for student loan refinancing.
Since student loan refinancing is a fiercely competitive market, borrowers may often be offered the same or similar rates between multiple companies, which means the slight advantages offered by one company may become the tipping point when choosing which to refinance with.
This SoFi vs. CommonBond comparison can help point out those differences.
At a Glance: SoFi vs. CommonBond Student Loan Refinancing
|Fixed APR||3.89% – 8.07%||3.67% – 7.25%|
|Variable APR||2.49% – 7.11%||2.53% – 7.42%|
|Loan Terms||5, 7, 10, 15, 20 years||5, 7, 10, 15, 20 years|
|Loan Amounts||$5,000 up to your outstanding loan balance||$5,000 – $500,000|
These two companies were each founded within a few years of each other. SoFi offers a wide range of financial products and isn’t limited to student loans. Mortgages and personal loans are two other services that applicants can find at SoFi. CommonBond, on the other hand, is a company that focuses solely on student loans. Most of its business appears to be in refinancing existing loans; however, CommonBond also offers new student loans to certain MBA students.
Interest Rates and Fees
Rates at SoFi currently start at 2.47% APR when a borrower takes advantage of the 0.25 percent autopay rate discount. The APR currently maxes out at 7.35% (also including the autopay discount). And SoFi never charges borrowers a prepayment penalty or origination fee on their loans, meaning there are no hidden “gotcha” fees. CommonBond’s rates currently begin at 2.80% with an autopay discount, which means they have SoFi’s lowest advertised rate beat by just 0.005 percent—a very negligible difference, but enough to give CommonBond the technical win in rates. The high end of CommonBond’s interest rate range is 7.35%. CommonBond’s borrowers also benefit from no origination or prepayment fees.
SoFi advertises itself as a tech-led company which uses complicated algorithms and underwriting processes to evaluate borrowers. Similarly, CommonBond uses proprietary algorithms that look at both traditional and non-traditional data points to provide applicants with a personalized interest rate. While SoFi does not have a minimum credit score or minimum income requirement, most of its borrowers end up having scores in the upper 700s and high incomes nonetheless. CommonBond states that its minimum credit score requirement is in the high 600s while its average borrower actually has a score in the high 700s. Though, it does not have a minimum income requirement.
A diploma is a must in order to apply with either lender. This is notable because many other student loan refinance companies will lend to borrowers who are still in school or who have left school without obtaining a degree. And those with just an undergraduate degree need to have distanced themselves from graduation by at least two years in order to refinance with CommonBond, while SoFi does not have this requirement.
Repayment Terms and Benefits
Standard repayment term lengths are available with either company, since they each offer terms of 5, 7, 10, 15, and 20 years. CommonBond, however, offers a hybrid loan unique to the company. Their hybrid loan is a 10-year loan that begins as a fixed rate and turns into a variable rate at the 5-year mark. Since there are no prepayment fees and the hybrid loan starts off with a lower fixed rate than the standard 10-year loan, this can be a savvy option for borrowers who are confident they will pay their loan off early—hopefully, before the variable rate has a chance to rise higher than the fixed rate. In addition to this unique option, CommonBond offers fixed and variable rates with terms ranging between 5 and 20 years.
CommonBond also has a social aspect to it. Through its partnership with Pencils of Promise, a nonprofit organization that funds overseas educations in developing countries, CommonBond funds a child’s tuition for a full year for every degree that is refinanced through its platform. This social mission is a draw for many borrowers who are increasingly looking for ways to combine their fiscal and social responsibility.
SoFi’s most unique repayment benefit is its well-known unemployment assistance program, which provides resume review and job hunting services to borrowers who find themselves unemployed. The reasoning behind this program is that it will cost SoFi less to assist borrowers in finding employment than it will to engage in debt collection if a jobless borrower cannot make their payments—undoubtedly a win-win situation for both borrower and lender. This sort of innovation must be working, because CommonBond has introduced a similar program, called “CommonBridge,” which matches unemployed borrowers to consulting opportunities at the company and aims to help them find new jobs. Both companies offer a temporary halt to monthly payments if the borrower experiences job loss.
Author: Jeff Gitlen
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