Two of the biggest players in student loan refinancing are SoFi and Earnest. These two companies have more similarities than differences, but when borrowers are evaluating refinancing opportunities, sometimes the smallest differences can have the biggest impact.
This SoFi vs. Earnest comparison reviews two of the main companies in a highly competitive market such as student loan refinancing – where student loans are consolidated under a new interest rate and repayment term.
SoFi & Earnest Overview
SoFi was founded in 2011 and offers a variety of financial services from mortgages and investment services to personal loans and student loans.
The company markets itself as “a new kind of finance company” and looks beyond just credit scores and credit history when deciding whether to loan money to an applicant.
>> See our full SoFi Student Loan Refinancing Review
Earnest was started just a couple of years after SoFi, in 2013, and is a technology-led lender that offers services such as personal loans and student loan refinancing.
The company is well-known for using proprietary algorithms to evaluate the creditworthiness of an applicant, instead of relying solely on traditional benchmarks such as credit score and income.
>> See our full Earnest Student Loans Review
At a Glance: SoFi vs. Earnest Student Loan Refinancing
|Fixed Rates||3.89% – 8.07%||3.50% – 7.89%|
|Variable Rates||2.49% – 7.11%||2.49% – 7.27%|
|Loan Terms||5, 7, 10, 15, or 20 years||5 – 20 years|
|Loan Amounts||$5,000 up to your total outstanding loan balance||$5,000 up to your total outstanding loan balance|
Interest Rates and Fees
Rates at SoFi currently range from 2.47% up to 7.98%, assuming the applicant takes advantage of the 0.25 percent rate discount when using autopay to make their payments.
Earnest also offers an autopay discount, and their rates currently run from 2.57% up to 7.89% with that option.
As you can see, SoFi has Earnest slightly beat in the competition for lowest advertised rates. However, since both companies use a pretty mysterious set of rules to determine what rate they will offer an applicant, it’s impossible to say that SoFi will necessarily beat Earnest every time for every borrower.
Also, we should note that these rates include the range for both variable and fixed rates. Neither company charges any origination or prepayment fees, which is good news for borrowers.
Expect both companies to heavily utilize a borrower’s credit score, no matter how innovative their underwriting algorithms and evaluations may be.
Typically, the best indication that an applicant will receive a favorable interest rate is nearly always their credit score, often paired with proof of high income. That said, both SoFi and Earnest will look further into an applicant’s background and financial status.
SoFi’s underwriting process requires that a borrower have graduated from a selection of Title IV colleges, have a strong monthly cash flow, and either have a job with significant income or have a job offer with a start date within 90 days.
They also require a “responsible financial history” but there isn’t much elaboration on what that entails.
Earnest analyzes savings patterns and career trajectory in order to provide rates and terms that are tailored to individual applicants. Their claim to investors is that this results in identification of less risky borrowers, which they are able to attract with suitably lower interest rates.
Earnest considers factors such as whether an applicant has invested into a 401k, and their past employment history and future job growth potential.
Interestingly, both SoFi and Earnest claim they technically have no minimum FICO score and no minimum income, and truly evaluate an applicant individually.
Of course, both companies also consider their exact underwriting processes to be trade secrets, making it a little difficult for applicants to thoroughly gauge ahead of time their chances of approval and likely interest rate.
Repayment Terms and Benefits
A minimum existing student loan balance of $5,000 is necessary in order to refinance with either company. Likewise, neither one has a set cap of how much in student loans an applicant can refinance.
SoFi offers 5, 7, 10, 15, and 20 year repayment terms. If a borrower finds themselves unemployed, SoFi will not only put a hold on payments but actually has a department that assists borrowers in creating resumes and hunting for a new job.
This unemployment assistance is unique to SoFi and borrowers say good things about it. SoFi also offers rate discounts on subsequent loans a borrower gets through its platform.
Earnest Precision Pricing is a unique scheduling plan option available to Earnest borrowers. The company claims that its borrowers can save thousands of dollars over the life of their loan, attributable to this feature.
It works by allowing borrowers to receive an interest rate anywhere along a curve representing the life of the loan, instead of getting just one rate based upon the available 5, 10, 15, or 20 year terms.
Although Earnest does not offer job replacement help, it does offer unemployment protection for 3 months at a time, for up to 12 months total over the life of the loan.
Author: Jeff Gitlen
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