SoFi Bank Review

SoFi is best known for its student loans, not bank accounts, but the lender is aiming to change that. Based in San Francisco, the bank was originally founded by four students who met at the Stanford Graduate School of Business, who hoped to provide students with education financing that was more affordable than traditional borrowing. They focused on low risk borrowers and graduates, and borrowing was initially tied to alumni funding and specific schools. Since then, the company has diversified their products to include mortgages, mortgage refinance and personal loans. This bank also offers some unique checking perks that are geared towards students.

How SoFi stacks up

Pros
  • Blended savings and checking with high APY
  • No monthly or overdraft fees
  • Award-winning mobile app and the ability to track spending
Cons
  • No branches or ATMs
  • No way to deposit cash
  • Support is hard to reach: no chat, and no 24/7 phone support

 

What’s interesting about SoFi

SoFi stands out because of its business model. Its lending is based on a unique underwriting process, and you will need to have good to excellent credit to get a loan from them, although they look at your credit report similarly to a lot of other lenders.
However, what makes this bank the most most unique is its SoFi Money account. It is a blended checking and savings account, so it acts more like a cash management account. This account currently offers two tiers: 1.60% APY. This interest rate rivals a lot of larger banks’ high-yield savings accounts, but doesn’t have the same restrictions those accounts have. There is no minimum balance and SoFi even offers free physical checks, something many online banks do not offer.

SoFi isn’t a bank, though, so your money is insured differently in the six partner banks where your money is kept. There are no overdraft fees, no ATM fees and you will be reimbursed any other ATM fees you are charged. For checking, the SoFi Money account is a great option.

Things to consider

As with every type of account, there are some cons to the SoFi Money account as well. It’s important to understand that since SoFi is not technically a bank, your money is stored in six of their partner banks. That makes SoFi Money a cash management account, so it’s subject to SIPC rules. Your money is insured, but in a different way than it is at your local bank or credit union.

There’s no way to deposit cash in your SoFi account, either. There are no local branches and SoFi do not have its own ATM network. If you need to make a cash deposit, you would have to put the money in another account and transfer it to SoFi.

Withdrawal limits are also odd and could create some challenges. You can’t withdraw more than $610 from an ATM in one day and can only do $250 in peer-to-peer transfers each day. So if you wanted to buy a $3,000 boat with cash from your account, it would take you some planning to do so. Also, this could become a factor when you are traveling. It’s definitely something to keep in mind.

There’s also not much available information about wire transfers. It is not clear whether account holders can make them or not. For most people this won’t matter, but in today’s global economy, it may make a difference to some.

Checking & savings accounts

Here’s the real difference with SoFi: unlike a bank, there are no dedicated savings accounts where you can earn higher interest. SoFi Money is a big winner here because it acts as both a savings and checking account. If you like to spend every dollar in your checking account, though, this might not be the one for you. Interest is paid based on your average balance annually, so if your balance is always low, that feature won’t help you much either. If you’re looking for a more traditional savings account and you want a higher interest rate, you’ll have to look elsewhere.

Because there are no overdraft fees and SoFi doesn’t offer a savings account, there is no overdraft line of credit, either. This can be tough if you are in a tight spot and need to borrow from the bank with some fees or interest and pay them back.

Money market accounts

SoFi currently does not offer money market accounts, and only offers one simple deposit account. It is simple, straightforward and as close to a free interest-bearing checking account as you can get, but right now, it is the only one SoFi Money bank offers.

If you are looking for a more traditional money market account, look at what Barclays or UFB Direct offer. There are also a number of online banks that dominate the list of the best money market rates due to their ability to offer better interest rates and terms than the larger, more traditional banks.

CDs

The single account offered by SoFi Bank means they do not offer CDs or any other deposit accounts. The best CD rates can be found with Discover banking services, Marcus by Goldman Sachs (the online banking services that are a division of Goldman Sachs) and BBVA.

Several online banks also offer a variety of terms and interest rates to meet various needs and the opening balances differ from bank to bank as well. Some CDs offer variable rates and others allow you to add money over time. Check with each bank to see which of their CD products best meets your needs.

Credit cards

SoFi Money Bank does not offer credit cards, either. Depending on your credit rating and what you use your credit card for, there are a lot of options out there.

Both Chase Bank and Capital One offer great rewards cards, from travel to cash back. Discover offers balance transfer specials to those with good credit and above, and companies like Credit One offer cards for those with less-than-perfect credit who are looking to rebuild. Shop around for the card that best meets your needs.

Personal loans

SoFi’s personal loans come without origination fees, pre-payment fees or late fees. Its rates start on the lower end of personal loans but can top out on the higher end of the spectrum, ranging from 5.99% to 18.38% APR with autopay.

When a person takes out a SoFi personal loan, they can borrow as little as $5,000 and as much as $100,000. The application is online, and if the borrower qualifies, the process is fairly easy and quick. Fixed-rate loans with SoFi can last from two to seven years.

Student loans

SoFi is well known for its private student loans and student loan refinancing. SoFi’s student loan rates are competitive, and it offers a wide range of products, including:

  • Medical resident refinancing.
  • Parent plus refinancing.
  • Undergraduate student loans.
  • Graduate student loans.
  • Parent student loans.

SoFi also offers perks like career planning and job searches to assist graduating students in finding positions in their fields. Everything is online, and it does not charge origination fees, late fees, or insufficient fund fees. Variable and fixed rates are available to help students cover 100% of the cost for school if necessary.

There are four repayment plans available for private student loan plans:

  • Deferred: Repayment begins after the borrower leaves school.
  • Interest-only: Pay interest only while in school.
  • Partial: Pay $25 a month while in school.
  • Immediate: Begin principal and interest repayment while in school.

Student loan borrowers should consult with financial advisors or do in-depth research to determine which amount, loan length and repayment plan are right for their financial situation.

Mortgage Loans

For mortgage loans, rates depend on individual applicants. Individuals looking to obtain a SoFi mortgage need a 10% down payment to qualify. Those who do not put down 20% will still be subject to PMI insurance. In addition, SoFi does not offer government-backed mortgages like VA, FHA, or USDA.

SoFi does not originate mortgages in Alaska, Arkansas, Hawaii, Massachusetts, Mississippi, Missouri, Nebraska, New Hampshire, New Mexico, New York, Ohio, Oklahoma, South Dakota, or West Virginia.

There are four types of mortgage loans offered through SoFi:

  • 30-year fixed.
  • 15-year fixed.
  • 30-year 7/1 ARM.
  • 30-year 5/1 ARM interest only.

SoFi’s mortgage application is entirely online and is a fairly easy process. The bank also considers elements of the borrower’s financial makeup that are non-traditional. For example, the bank is able to work with self-employed borrowers. SoFi members are also eligible for member discounts like money off mortgage fees.

Mortgage Refinancing

SoFi offers several types of mortgage refinancing loans. These include refinance, cash-out refinance, and student loan cash-out refinance.

The mortgage refinance option is without hidden fees. There is a 90% maximum loan-to-value ratio; for example, if your property is appraised at $200,000 and you would like to refinance the remaining $150,000 left on the mortgage, the LTV would be 75% and you could qualify for a SoFi refinance mortgage loan.

The cash-out refinance option lets borrowers turn equity into cash. This loan is best for high-interest debt consolidation and home renovations and SoFi offers 80% LTV maximum for this refinance option.

The student loan cash-out refinance allows borrowers to leverage their home equity to pay off student loans.

SoFi members are eligible to receive member discounts with mortgage refinancing.

Home equity loans & HELOC

SoFi does not offer HELOC or home equity loans. Instead, the lending company suggests using its other personal loan products to fund home improvement, medical expenses, student loans or debt consolidation. However, if you are set on using a home equity loan to access your home’s equity, U.S. Bank offers home equity loans with no origination or up-front fees with rates as low as 4.89% on a 10-year loan and 5.24% APR on 15-year loans.

The lending company also offers HELOCs for as little as 4.99% APR, but of course, your interest rate will depend on your loan amount, financial health, length of the loan and other factors. But HELOCs are useful when you’re not sure how much you’ll need and you don’t want to borrow a lump sum all at once. With a HELOC, just withdraw what you need, when you need it, then pay back the amount at the end of the draw period.

Car loans

SoFi does not offer car loans, but it does offer personal loans that could be used to cover the cost of a car. For those searching specifically for a car loan option, consider LightStream. As the lending division of SunTrust Bank, LightStream offers great rates and will beat competitors by 0.10% APR if presented with another loan offer of the same terms and amount. Furthermore, customers can receive funds in the same business day and will receive further APR discounts if automatic payments are set up. Applying does require a hard credit check, so keep that in mind when comparing car loan rates.

The final word

The SoFi Money account was originally designed for students, and it serves that purpose well. If you want a fee-free cash management account that earns interest, you don’t deal in cash and you tend to leave a higher balance in your account, SoFi Money may be right for you.

Also, if you want to consolidate your student loans or need financing to continue your education, SoFi has some great options for low-risk buyers. The same is true for mortgages, mortgage refinancing and personal loans. The ability to have a cash management account in the same place as your loans could be a real advantage.

If you want one stop for checking, savings and investment accounts, though, you’ll be better off at a traditional bank. If you often need to deposit cash or withdraw it in larger amounts, the SoFi money account may not meet your needs.