Online lending has exploded in the last few years. The idea of being able to apply for a loan while sitting on the couch at home is becoming more popular, and several lenders have risen to the top of the pile because of their products and customer service.
Two of those highly popular companies are SoFi and LendingClub. Both companies offer personal loans to creditworthy customers, but how do they stack up against each other? Is there one that is better than the other? It depends on what you’re looking for.
SoFi vs. LendingClub: Comparison
|Rates (APR)||5.74% – 16.99%||6.95% – 35.89%|
|Loan Terms||3 – 7 years||3 – 5 years|
|Loan Amounts||$5,000 – $100,000||Up to $40,000|
|Fees||No origination or prepayment penalties||Origination fee: 1% – 6%|
SoFi Personal Loans
SoFi, which stands for Social Finance, started out as a refinancer of student loans and branched out to more products as they grew. They now offer everything from student loans to parent loans, personal loans to life insurance. In the personal loan arena, they offer amounts of $5000 to $100,000, with fast online applications that can be done anytime. Customer service is available 7 days a week, and online pre-approval is immediate.
The preapproval comes from a soft credit inquiry, which doesn’t leave a mark on your credit report or drop your score. This means that you can get pre-qualified and get an idea on what your interest rate would be, without having a hard inquiry show on your credit for the next 2 years.
SoFi’s rates are highly competitive, with fixed rate loans starting at 6.99% APR if you set up AutoPay. Variable loans are even lower, at 6.26%. Those rates come in handy if you’re using the loan to pay off credit card debt, which on average is about 12% APR. Loan terms can be as short as 3 years, or as long as 7, and there are no origination or pre-payment fees.
Repayment terms can also be flexible. On a $30,000 personal loan with the fixed rate APR, the monthly payment on a 3-year loan is about $900; on that same loan with a 7-year term, the payment is only about $475.
The drawback to SoFi loans is that if you don’t have good credit, chances are you won’t be approved. SoFi doesn’t have a set minimum credit score, but on average their borrowers have a score of 700 or above. If you’re looking to consolidate credit card debt, for instance, you’ll want to look into SoFi long before you get into a bad financial situation with your debt.
LendingClub Personal Loans
LendingClub also offers personal loans for a variety of reasons, and also has a no-hassle online application process. After filling out the basic pre-approval online form, LendingClub will give you several loan options to choose from, with different payment plans and interest rates from their investors.
Because they perform a soft credit inquiry initially, you won’t see it reflected on your credit report, and it won’t affect your score, even if you’re declined.
Proceeds can be in your bank account in as little as 7 days from application, and setting up automatic payments gives you a small discount on your interest rate. Rates can vary widely depending on your creditworthiness, loan term, and other factors; they start at 6.95% but may be as high as 35.89%.
The company does charge a 1-6% origination fee, which means if you take out a $10,000 loan, you could have as much as $600 taken out of the loan proceeds before you ever receive them. You’ll need to plan for that, and request a loan big enough to meet both your needs and the fee; just be aware that a bigger loan also means more interest paid over the long term. The origination fee is considered part of the APR, and if you make your payment by check, you’ll pay a monthly fee, which is also included in the APR.
Loan amounts can go up to $40,000, and loan terms are either 3 years or 5 years, so keep that in mind when deciding to borrow a larger amount. With a $30,000 loan and 5-year term, the monthly payment could be as much as $670. If you’re able to pay off the loan early, there are no prepayment fees.
Their loans aren’t available in every state, so check their website to make sure your state allows it. The soft inquiry pre-approval process means you can apply to both LendingClub and SoFi and consider the various offers, so you’re bound to find the right loan for your life. SoFi and LendingClub are both viable options for those looking for a quick, online personal loan that minimizes hassle.
Author: Jeff Gitlen
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