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College Students and Recent Grads, Reviews, Student Loan ReFi

SoFi Parent PLUS Loan Refinance Review

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Senior Couple Talking To Financial Advisor At Home

Updated August 21, 2017

Are you a parent who wanted to help your child finance his or her education, and ended up taking out more loans than anticipated? Many parents find themselves in a precarious situation as they try to plan for retirement and while balancing student loan debt.

If you’re looking to save on the amount of interest you’re paying, SoFi’s Parent PLUS loan refinance program may be right for you.

Details of the Parent PLUS Loan

You can refinance a minimum of $5,000 under SoFi. Fixed rates range from 3.35% to 6.75% APR and variable rates range from 2.815% – 6.490% APR (these rates assume you enroll in autopayment).

Terms of 5, 7, 10, and 15 years are available. Variable rates on terms of 5, 7, and 10 years are capped at 8.95%, while the 15 year term is capped at 9.95%.

An example payment looks like this: if you refinance $10,000 on a 5 year term with a fixed APR of 5.49%, your monthly payment will be $190.97 and you’ll pay a total of $11,457.93 over the life of the loan. If you refinance $10,000 on a 5 year term with a variable APR of 4.2%, your monthly payment will be $185.07 and you’ll pay a total of $11,104.43.

How Does the Parent PLUS Loan From SoFi Compare to a Federal PLUS Loan?

The interest rate for Federal Direct PLUS Loans disbursed on or after July 1st, 2015 and before July 1st, 2016 is 6.84%. During much of the 2000s, interest rates were higher. Currently, interest rates are fixed – variable rates are unavailable.

Most people are looking to refinance to save money, and SoFi offers very competitive rates compared with the Direct PLUS Loan, especially on variable rates.

While there are no fees to refinance, you should calculate your estimated savings before going through the process. Be aware if you do refinance, you’ll lose out on certain benefits that come with having Federal student loans, such as deferment, forbearance, and various repayment options.

PLUS loans made to parents are eligible for the Graduated or Extended Repayment Plans, and Direct PLUS loans are also eligible for forgiveness. In some cases, PLUS loans can be discharged due to the death of the borrower (or student).

Private loans often don’t extend these same benefits. In fact, SoFi explicitly states on its legal page that this loan “is not discharged in the event of death or permanent disability of the borrower or student on whose behalf the loan is taken out.”

Eligibility Requirements

You must be a U.S. citizen or permanent resident and employed to be approved. SoFi is unable to lend in Nevada, and variable rates aren’t offered in Illinois, Ohio, or Tennessee. The loans must have been used to obtain at least a Bachelor’s degree with an eligible school as well.

There are no specific credit score requirements as SoFi tries to take a broader view of borrowers. It focuses on income and credit history instead.

Application Process and Documents Needed

The application process to refinance a PLUS Loan with SoFi is easy and can be done completely online. The application takes around 15 minutes to complete, and you’ll know whether or not you qualify by going through the pre-approval process first. During this portion of the application, a soft credit inquiry is used. If you decide to move forward with the loan offered to you, a hard credit inquiry will be used.

You’ll be asked to upload a few documents, so it’s a good idea to have the following ready to go:

  • Proof of residence – ID with matching address, otherwise a utility bill dated within the last 60 days is okay
  • Proof of income – most recent pay stubs
  • Proof of citizenship – a passport or birth certificate can be provided
  • Verification of loans – most recent loan statements for the loans you’re refinancing

Once you submit this documentation, SoFi’s review team gets to work on evaluating your loan. If no other documentation is needed, reviews can take anywhere from 2 to 3 weeks to complete.

The Fine Print

There isn’t an origination fee or application fee, and there are no prepayment penalties. Rates are determined on a number of factors, including the term you choose, your income, and your credit history.

There are late fees associated with the loan. The Parent PLUS Refinance program is currently offered through SoFi’s lending partner, Mohela, and it assesses any fees owed. When you receive the paperwork for the loan, the fees can be found under the disclosures.

Repayment Assistance Options

If you’re struggling to repay the loan after refinancing with SoFi, we recommend you contact a representative and make them aware of the situation. The worst thing you can do with any loan is not make a payment.

SoFi offers unemployment protection on a case-by-case basis, during which payments can be paused for a period of 3 to 12 months.

Pros and Cons of SoFi Parent PLUS Loan

Pro: SoFi offers much better rates than the 6.84% fixed rate that comes with Direct PLUS loans. If you have a higher interest rate – around 8% – you’ll stand to benefit even more.

Con: As we mentioned, refinancing means losing out on benefits associated with Federal student loans. If you’re not as concerned about needing repayment assistance, the savings might be enough to make refinancing worthwhile.

Pro: SoFi also offers variable interest rates, whereas the most recent Direct PLUS loans don’t. Variable rates can be tricky, though – SoFi says rates may change on a monthly basis. If you value stability and peace of mind, variable rates may not be for you. If you’re trying to pay off your balance quicker, and a lower interest rate would help, then it might be worth considering this option. 

Con: You may have to extend the repayment term to get a lower monthly payment, as SoFi offers terms up to 15 years. Unfortunately, this increases the amount of interest you’ll pay over the life of the loan. It’s important to use a calculator to estimate how much your savings will be to make sure refinancing is worth it. For example, if you have less than 5 years remaining on your loan, refinancing may not save you a lot of money.

Pro: SoFi offers unemployment protection, and you can also take advantage of SoFi’s career assistance program. If you or your child is experiencing trouble finding employment, it will connect you with its network of alumni and give you tools and tips to succeed in your job search.

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 *referral link

Other Parent PLUS Refinance Alternative

If you don’t qualify with SoFi, you can try these lenders that also offer refinancing options:

CommonBond: Fixed APRs range from 3.35% to 6.74%, and variable APRs range start at 2.80%, and terms offered are 5, 10, 15, and 20 years. CommonBond also has hybrid APRs. Only a 10 year term is offered with this choice; it starts off as fixed for 5 years, and changes over to variable for 5 years. There are no origination fees or application fees, no prepayment penalty, and CommonBond actually allows you to transfer your loan to your child (which isn’t allowed with Federal loans). You can borrow a maximum of $110,000.

CommondBondbank

 

 

Citizens Bank: Citizens Bank refinances Parent PLUS and Direct PLUS loans through its Education Refinance program. The minimum amount you can refinance is $10,000 and up to $90,000 for Bachelor’s degrees and below, $130,000 for graduate and doctoral degrees, and $170,000 for professional degrees. For a Bachelor’s degree and above, you must have made 3 consecutive monthly payments to refinance. For anything less than a Bachelor’s degree, you must have made 12 consecutive monthly payments. The loan you’re refinancing must be in repayment status and can’t be enrolled in an Income-Based Repayment plan. Fixed APRs start at 6.24%. Terms of 5, 10, 15, or 20 years are offered. You need a minimum income of $24,000 to qualify.

citizens-bank

 

Be sure to shop around as there are other lenders out there that will refinance PLUS loans – you want to make sure you’re getting the best rates and terms available to you so you can save the most. Shopping around within 30 days will only count as one credit inquiry, so your credit won’t get penalized heavily. Take advantage of this and lessen the burden of student loan payments so you can focus on saving for your future.

We’ll receive a referral fee if you click on the “Apply Now” buttons in this post. This does not impact our rankings or recommendations You can learn more about how our site is financed here.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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Personal Loans

SoFi Review: Personal & Student Loans with Low Rates and No Fee

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

SoFi Review: Personal & Student Loans

Updated August 21, 2017

SoFi is an online loan company that offers student loan refinancing options, mortgages and personal loans. SoFi offers some of the lowest interest rates and the best consumer experience in the market. We have researched thousands of products from hundreds of companies, and SoFi is one of our favorites. However, they have strict credit criteria and target people with good jobs, good income, a proven ability to manage a budget and good credit history. If SoFi* approves you, you will probably have a difficult time finding a lower interest rate anywhere else.

In this post, we will review both Student Loans and Personal Loans. (They have just launched mortgages, and we will be updating this post later with a review of that product). For each, we will discuss:

  • The details of the product: how much can you borrow, and at what price
  • Approval criteria: how does SoFi underwrite, and who are they likely to accept

In addition, at the end we will give you more details of SoFi, including who funded them, how big they are and their reputation.

Student Loan Refinance (Skip Ahead for Personal Loans)

SoFi has just reduced the minimum loan amount. You can now refinance as little as $5,000 of student loan debt. There is no cap on how much you can refinance. Based upon your cash flow, SoFi will try to provide an option to refinance all of your student loan debt.

There is no origination fee and no prepayment penalty. It offers some of the lowest rates out there. Fixed APRs range from 3.35% – 7.125%*, and variable APRs range from 2.815% – 6.740%.* These rates are available so long as you enroll in auto-pay.* Given that interest rates are at an all-time low, you should think carefully before signing up for a variable interest rate. If you can pay off your loan in a short period of time, you could save a lot of money. If it will take you longer, you may not want to take the interest rate risk.

You can refinance on a 5, 10, 15, or 20 year term.

For example, if you borrow $30,000 on a 10 year term at an APR of 4.615%, your monthly payment will be $312.58. Under those terms, you’re paying back a total of $37,509.60 (120 payments). If you borrow the same amount, but have a 6.8% APR, your monthly payment is $345.24, paying back a total of $41,428.80. In this case, SoFi’s low rates have the potential to save you nearly $4,000.

SoFi will refinance both private and federal student loans. However, if you refinance a federal loan you will give up all federal protections and programs, including income-based repayment programs. SoFi is unique among private lenders because it offer unemployment insurance, free of charge. If you lose your job for no fault of your own (you can’t quit), SoFi will suspend your monthly payments until you find a new job. You can do this for up to 12 months. The interest that accrues during this period would be added to the loan.

SoFi also offers an entrepreneur program to help graduates who dream of owning a business.

Under this program, loans can be deferred for six months so borrowers can focus on growing their businesses. SoFi provides access to networking events, mentors, and investors.

Refinancing with SoFi isn’t an option for everyone. First, refinancing is currently unavailable to those residing in Nevada, and variable rate options aren’t available to those in Ohio or Tennessee.

Second, SoFi has a list of available schools and programs it services. If your school or program isn’t on that list, you won’t be eligible to refinance.

Third, SoFi typically requires applicants to have excellent credit. It occasionally accepts co-signers – you must call to review your situation with a representative. However, there’s no co-signer release if you move forward with one on your loan.

To be eligible to refinance your student loans with SoFi, you need to meet the following requirements:

  • You must be a U.S. citizen or permanent resident 18 years or older
  • You need to have a 4-year undergraduate or graduate degree from a Title IV accredited institution
  • You have to be employed or have an offer of employment starting in 90 days from the time you apply
  • You need to be in good standing on your current student loans
  • You should have a good, stable employment history
  • A strong monthly cash flow is a must
  • An excellent FICO score will improve your chances of being approved

The application process is straightforward and SoFi’s pre-approval should take you less than 15 minutes to complete. You likely won’t need most of the documents listed below until you’re ready to move forward with a loan, but they’re good to have on hand while you’re shopping around.

  • Existing student loan information (SoFi will need your account information for the loans you wish to finance)
  • Employment information – salary, offer of employment, length of employment
  • Most recent pay stubs as proof of income and employment (if you’re currently employed)
  • Diploma or transcript in the event SoFi needs to verify your graduation

It’s good to note SoFi accepts screenshots from your PC and pictures taken from a phone, so if you don’t have access to a scanner, there’s no need to worry.

If you’re ready to get started, you can apply for a refinance and check your rate by clicking the button below.

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on SoFi’s secure website

Details on SoFi’s Personal Loan

At SoFi, you can borrow between $5,000 and $100,000.

There is no origination fee, no prepayment penalty and no balance transfer fee. They are truly unique in this regard.

You can borrow the money for 3, 5 or 7 years.

In addition, SoFi offers unemployment protection. Unlike traditional personal loan companies, they are not looking to make money from unemployment insurance. Instead, they are offering it as a feature and a brand promise. And the insurance is generous. If you lose your job through no fault of your own, you will be given a payment holiday. Interest will continue to accrue on the loan (and be added to the balance), but no payment will be due and your loan will continue to be reported as current to the credit bureau. You can have 3 consecutive months of payments made at a time, and you can have up to 12 months of payments made during the life of the loan. That offers great flexibility. In addition, they offer job placement services to help you find a job.

Fixed interest rates range from 5.49% to 14.24%* – but you have to sign up for auto-pay in order to get these rates. In addition, SoFi offers variable interest rates from 5.17% – 11.32%* with auto-pay. The rates are based upon 1-month LIBOR and are capped at 14.95%.*

You can use the loans for almost any purpose: pay off credit card debt, home improvement, or anything else because the money can be deposited as cash in your checking account.

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What Does It Take to Get Approved?

In order to be approved for a loan, you must at least meet the following requirements:

  • You are a US citizen or permanent resident
  • You are at least the age of majority in your state (typically 18)
  • You are currently employed
  • You have graduated from a selection of Title IV accredited universities or graduate programs (only for the student loan product. For personal loans, there is no university requirement).

Personal loans are not available to residents of the following states: Mississippi, Nevada and Tennessee.

If you fail to meet the above criteria, you will be rejected. However, just because you meet these criteria does not mean that you will be approved. SoFi will:

  • Perform an analysis of your ability to repay. They do a “cash flow analysis” looking at your income and expenditure, making sure you can pay
  • Perform an analysis of your history with credit. Missed payments and defaults will most likely get your rejected. You need to have a strong history of repayment. Although they are not a FICO-driven lender (because they look at education, employment and cash flow), the following people will likely have a difficulty getting approved:
    • People who do not have excellent credit. In particular, if you have missed payments or have rapidly built up debt, you could find it difficult to qualify.
    • If you have a “thin credit file”, you will still have a good chance of getting approved. A thin file means that you do not have much information in your credit report. Although that could be a problem with traditional credit scores, SoFi might still be willing to work with you.
    • People with collection items, judgments or other negative legal action

SoFi offers some of the lowest interest rates out there, and they are picky about who they approve. If you have a good degree, a good job and a history of making payments on time, you will likely be able to benefit from SoFi.

And here is the best news: you can check to see if you will be approved, and the interest rate you would receive, without hurting your credit score. SoFi uses what is called a “soft pull” to determine your interest rate and your loan amount.

Given how low the interest rates are at SoFi, if you have a college degree you should take the 3-4 minutes to see if you can be approved. The only cost is your time.

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Remember that you’re in no way obligated to take a loan once you apply.

Unless you accept the loan and go through with the hard credit inquiry, SoFi doesn’t hold you to taking the loans presented to you.

All About SoFi

You can trust SoFi. They are a very well funded start-up, having raised $164 million from some of the biggest and most influential venture capital firms in the Silicon Valley.

They have also built a very strong relationship with investors, and have funded more than $2 billion in loans to date.

SoFi has been created with a mission to revolutionize the way we borrow in this country. In particular:

  • They want to make it easy for people to shop for a loan, believing that you should be able to get your interest rate without hurting your score
  • They want to create an easy, seamless experience with a great user experience
  • They want to cut out the costs of the big banks, giving lower interest rates to borrowers and higher interest rates to lenders
  • They want to create a different type of borrowing experience, by providing unemployment insurance as a free benefit.

Their mission, and their personal loan product, align to the vision of MagnifyMoney. When we created MagnifyMoney, we hoped to find lenders like SoFi, and are pleased to award them an A+ Transparency Score.

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We only have one criticism: their underwriting criteria is very tight right now. Hopefully, over time, they will be able to expand the criteria and be able to provide the great experience to people who may have experienced some financial difficulties in the past.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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Life Events, Mortgage

The Best Mortgages That Require No or Low Down Payment

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

If you’re considering buying a home, you’re probably wondering how much you’ll need for a down payment. It’s not unusual to be concerned about coming up with a down payment. According to Trulia’s report Housing in 2017, saving for a down payment is most often cited as the biggest obstacle to homeownership.

Maybe you’ve heard that you should put 20% down when you purchase a home. It’s true that 20% is the gold standard. If you can afford a big down payment, it’s easier to get a mortgage, you may be eligible for a lower interest rate, and more money down means borrowing less, which means you’ll have a smaller monthly payment.

But the biggest incentive to put 20% down is that it allows you to avoid paying for private mortgage insurance. Mortgage insurance is extra insurance that some private lenders require from homebuyers who obtain loans in which the down payment is less than 20% of the sales price or appraised value. Unlike homeowners insurance, mortgage protects the lender – not you – if you stop making payments on your loan. Mortgage insurance typically costs between 0.5% and 1% of the entire loan amount on an annual basis. Depending on how expensive the home you buy is, that can be a pretty hefty sum.

While these are excellent reasons to put 20% down on a home, the fact is that many people just can’t scrape together a down payment that large, especially when the median price of a home in the U.S. is a whopping $345,800.

Fortunately, there are many options for homebuyers with little money for a down payment. You may even be able to buy a house with no down payment at all.

Here’s an overview of the best mortgages you can be approved for without 20% down.

FHA Loans

An FHA loan is a home loan that is insured by the Federal Housing Administration. These loans are designed to promote homeownership and make it easier for people to qualify for a mortgage. The FHA does this by making a guarantee to your bank that they will repay your loan if you quit making payments. FHA loans don’t come directly from the FHA, but rather an FHA-approved lender. Not all FHA-approved lenders offer the same interest rates and costs, even for the same type of loan, so it’s important to shop around.

Down payment requirements

FHA loans allow you to buy a home with a down payment as low as 3.5%, although people with FICO credit scores between 500 and 579 are required to pay at least 10% down.

Approval requirements

Because these loans are geared toward lower income borrowers, you don’t need excellent credit or a large income, but you will have to provide a lot of documentation. Your lender will ask you to provide documents that prove income, savings, and credit information. If you already own any property, you’ll have to have documentation for that as well.

Some of the information you’ll need includes:

  • Two years of complete tax returns (three years for self-employed individuals)
  • Two years of W-2s, 1099s, or other income statements
  • Most recent month of pay stubs
  • A year-to-date profit-and-loss statement for self-employed individuals
  • Most recent three months of bank, retirement, and investment account statements

Mortgage insurance requirements

The FHA requires both upfront and annual mortgage insurance for all borrowers, regardless of their down payment. On a typical 30-year mortgage with a base loan amount of less than $625,500, your annual mortgage insurance premium will be 0.85% as of this writing. The current upfront mortgage insurance premium is 1.75% of the base loan amount.

Casey Fleming, a mortgage adviser with C2 Financial Corporation and author of The Loan Guide: How to Get the Best Possible Mortgage, also reminds buyers that mortgage insurance on an FHA loan is permanent. With other loans, you can request the lenders to cancel private mortgage insurance (MIP) once you have paid down the mortgage balance to 80% of the home’s original appraised value, or wait until the balance drops to 78% when the mortgage servicer is required to eliminate the MIP. But mortgage insurance on an FHA loan cannot be canceled or terminated. For that reason, Fleming says “it’s best if the homebuyer has a plan to get out in a couple of years.”

Where to find an FHA-approved lender

As we mentioned earlier, FHA loans don’t come directly from the FHA, but rather an FHA-approved lender. Not all FHA-approved lenders offer the same interest rates and costs, even for the same type of loan, so it’s important to shop around.

The U.S. Department of Housing and Urban Development (HUD) has a searchable database where you can find lenders in your area approved for FHA loans.

First, fill in your location and the radius in which you’d like to search.

Next, you’ll be taken to a list of FHA-approved lenders in your area.

Who FHA loans are best for

FHA loans are flexible about how you come up with the down payment. You can use your savings, a cash gift from a family member, or a grant from a state or local government down-payment assistance program.

However, FHA loans are not the best option for everyone. The upfront and ongoing mortgage insurance premiums can cost more than private mortgage insurance. If you have good credit, you may be better off with a non-FHA loan with a low down payment and lower loan costs.

And if you’re buying an expensive home in a high-cost area, an FHA loan may not be able to provide you with a large enough mortgage. The FHA has a national loan limit, which is recalculated on an annual basis. For 2017, in high-cost areas, the FHA national loan limit ceiling is $636,150. You can check HUD.gov for a complete list of FHA lending limits by state.

SoFi

For borrowers who can afford a large monthly payment but haven’t saved up a big down payment, SoFi offers mortgages of up to $3 million. Interest rates will vary based on whether you’re looking for a 30-year fixed loan, a 15-year fixed loan, or an adjustable rate loan, which has a fixed rate for the first seven years, after which the interest rate may increase or decrease. Mortgage rates started as low as 3.09% for a 15-year mortgage as of this writing. You can find your rate using SoFi’s online rate quote tool without affecting your credit.

Down payment requirements

SoFi requires a minimum down payment of at least 10% of the purchase price for a new loan.

Approval requirements

Like most lenders, SoFi analyzes FICO scores as a part of its application process. However, it also considers factors such as professional history and career prospects, income, and history of on-time bill payments to determine an applicant’s overall financial health.

Mortgage insurance requirements

SoFi does not charge private mortgage insurance, even on loans for which less than 20% is put down.

What we like/don’t like

In addition to not requiring private mortgage insurance on any of their loans, SoFi doesn’t charge any loan origination, application, or broker commission fees. The average closing fee is 2% to 5% for most mortgages (it varies by location), so on a $300,000 home loan, that is $3,000. Avoiding those fees can save buyers a significant amount and make it a bit easier to come up with closing costs. Keep in mind, though, that you’ll still need to pay standard third-party closing costs that vary depending on loan type and location of the property.

There’s not much to dislike about SoFi unless you’re buying a very inexpensive home in a lower-cost market. They do have a minimum loan amount of $100,000.

Who SoFi mortgages are best for

SoFi mortgages are really only available for people with excellent credit and a solid income. They don’t work with people with poor credit.

SoFi does not publish minimum income or credit score requirements.

VA Loans

Rates can vary by lender, but currently, rates for a $225,000 30-year fixed-rate loan run at around 3.25%, according to LendingTree. (Disclosure: LendingTree is the parent company of MagnifyMoney.)

Down payment requirements

Eligible borrowers can get a VA loan with no down payment. Although the costs associated with getting a VA loan are generally lower than other types of low-down-payment mortgages, Fleming says there is a one-time funding fee, unless the veteran or military member has a service-related disability or you are the surviving spouse of a veteran who died in service or from a service-related disability.

That funding fee varies by the type of veteran and down-payment percentage, but for a new-purchase loan, the funding fee can run from 1.25% to 2.4% of the loan amount.

Approval requirements

VA loans are typically easier to qualify for than conventional mortgages. To be eligible, you must have suitable credit, sufficient income to make the monthly payment, and a valid Certificate of Eligibility (COE). The COE verifies to the lender that you are eligible for a VA-backed loan. You can apply for a COE online, through your lender, or by mail using VA Form 26-1880.

The VA does not require a minimum credit score, but lenders generally have their own requirements. Most ask for a credit score of 620 or higher.

If you’d like help seeing if you are qualified for a VA loan, check to see if there’s a HUD-approved housing counseling agency in your area.

Mortgage insurance requirements

Because VA loans are guaranteed by the Department of Veterans Affairs, they do not require mortgage insurance. However, as we mentioned previously, be prepared to pay an additional funding fee of 1.25% to 2.4%.

What we like/don’t like

There’s no cap on the amount you can borrow. However, there are limits on the amount the VA can insure, which usually affects the loan amount a lender is willing to offer. Loan limits vary by county and are the same as the Federal Housing Finance Agency’s limits, which you can find here.

HomeReady

 

The HomeReady program is offered by Fannie Mae. HomeReady mortgage is aimed at consumers who have decent credit but low- to middle-income earnings. Borrowers do not have to be first-time home buyers but do have to complete a housing education program.

Approval requirements

HomeReady loans are available for purchasing and refinancing any single-family home, as long as the borrower meets income limits, which vary by property location. For properties in low-income areas (as determined by the U.S. Census), there is no income limit. For other properties, the income eligibility limit is 100% of the area median income.

The minimum credit score for a Fannie Mae loan, including HomeReady, is 620.

To qualify, borrowers must complete an online education program, which costs $75 and helps buyers understand the home-buying process and prepare for homeownership.

Down payment requirements

HomeReady is available through all Fannie Mae-approved lenders and offers down payments as low as 3%.

Reiss says buyers can combine a HomeReady mortgage with a Community Seconds loan, which can provide all or part of the down payment and closing costs. “Combined with a Community Seconds mortgage, a Fannie borrower can have a combined loan-to-value ratio of up to 105%,” Reiss says. The loan-to-value (LTV) ratio is the ratio of outstanding loan balance to the value of the property. When you pay down your mortgage balance or your property value increases, your LTV ratio goes down.

Mortgage insurance requirements

While HomeReady mortgages do require mortgage insurance when the buyer puts less than 20% down, unlike an FHA loan, the mortgage insurance is removed once the loan-to-value ratio reaches 78% or less.

What we like/don’t like

HomeReady loans do require private mortgage insurance, but the cost is generally lower than those charged by other lenders. Fannie Mae also makes it easier for borrowers to get creative with their down payment, allowing them to borrow it through a Community Seconds loan or have the down payment gifted from a friend or family member. Also, if you’re planning on having a roommate, income from that roommate will help you qualify for the loan.

However, be sure to talk to your lender to compare other options. The HomeReady program may have higher interest rates than other mortgage programs that advertise no or low down payments.

USDA Loan

USDA loans are guaranteed by the U.S. Department of Agriculture. Although the USDA doesn’t cap the amount a homeowner can borrow, most USDA-approved lenders extend financing for up to $417,000.

Rates vary by lender, but the agency gives a baseline interest rate. As of August 2016, that rate was just 2.875%

Approval requirements

USDA loans are available for purchasing and refinancing homes that meet the USDA’s definition of “rural.” The USDA provides a property eligibility map to give potential buyers a general idea of qualified locations. In general, the property must be located in “open country” or an area that has a population less than 10,000, or 20,000 in areas that are deemed as having a serious lack of mortgage credit.

USDA loans are not available directly from the USDA, but are issued by approved lenders. Most lenders require a minimum credit score of 620 to 640 with no foreclosures, bankruptcies, or major delinquencies in the past several years. Borrowers must have an income of no more than 115% of the median income for the area.

Down payment requirements

Eligible borrowers can get a home loan with no down payment. Other closing costs vary by lender, but the USDA loan program does allow borrowers to use money gifted from friends and family to pay for closing costs.

Mortgage insurance requirements

While USDA-backed mortgages do not require mortgage insurance, borrowers instead pay an upfront premium of 2% of the purchase price. The USDA also allows borrowers to finance that 2% with the home loan.

What we like/don’t like

Some buyers may dismiss USDA loans because they aren’t buying a home in a rural area, but many suburbs of metropolitan areas and small towns fall within the eligible zones. It could be worth a glance at the eligibility map to see if you qualify.

At a Glance: Low-Down-Payment Mortgage Options

To see how different low-down-payment mortgage options might look in the real world, let’s assume a buyer with an excellent credit score applies for a 30-year fixed-rate mortgage on a home that costs $250,000.

As you can see in the table below, their monthly mortgage payment would vary a lot depending on which lender they use.

 

Down Payment


Total Borrowed


Interest Rate


Principal & Interest


Mortgage Insurance


Total Monthly Payment

FHA


FHA

3.5%
($8,750)

$241,250

4.625%

$1,083

$4,222 up front
$171 per month

$1,254

SoFi


SoFi

10%
($25,000)

$225,000

3.37%

$995

$0

$995

VA


VA Loan

0%
($0)

$250,000

3.25%

$1,088

$0

$1,088

HomeReady


homeready

3%
($7,500)

$242,500

4.25%

$1,193

$222 per month

$1,349

USDA


homeready

0%

$250,000

2.875%

$1,037

$5,000 up front,
can be included in
total financed

$1,037

Note that this comparison doesn’t include any closing costs other than the upfront mortgage insurance required by the FHA and USDA loans. The total monthly payments do not include homeowners insurance or property taxes that are typically included in the monthly payment.

ANALYSIS: Should I put down less than 20% on a new home just because I can?

So, if you can take advantage of a low- or no-down-payment loan, should you? For some people, it might make financial sense to keep more cash on hand for emergencies and get into the market sooner in a period of rising home prices. But before you apply, know what it will cost you. Let’s run the numbers to compare the cost of using a conventional loan with 20% down versus a 3% down payment.

Besides private mortgage insurance, there are other downsides to a smaller down payment. Lenders may charge higher interest rates, which translates into higher monthly payments and more money spent over the loan term. Also, because many closing costs are a percentage of the total loan amount, putting less money down means higher closing costs.

For this example, we’ll assume a $250,000 purchase price and a loan term of 30 years. According to Freddie Mac, during the week of June 22, 2017, the average rate for a 30-year fixed-rate mortgage was 3.90%.

Using the Loan Amortization Calculator from MortgageCalculator.org:

Assuming you don’t make any extra principal payments, you will have to pay private mortgage insurance for 112 months before the principal balance of the loan drops below 78% of the home’s original appraised value. That means in addition to paying $169,265.17 in interest, you’ll pay $11,316.48 for private mortgage insurance.

The bottom line

Under some circumstances, a low- or no-down-payment mortgage, even with private mortgage insurance, could be considered a worthwhile investment. If saving for a 20% down payment means you’ll be paying rent longer while you watch home prices and mortgage rates rise, it could make sense. In the past year alone, average home prices increased 16.8%, and Kiplinger is predicting that the average 30-year fixed mortgage rate will rise to 4.1% by the end of 2017.

If you do choose a loan that requires private mortgage insurance, consider making extra principal payments to reach 20% equity faster and request that your lender cancels private mortgage insurance. Even if you have to spend a few hundred dollars to have your home appraised, the monthly savings from private mortgage insurance premiums could quickly offset that cost.

Keep in mind, though, that the down payment is only one part of the home-buying equation. Sonja Bullard, a sales manager with Bay Equity Home Loans in Alpharetta, Ga., says whether you’re interested in an FHA loan or a conventional (i.e., non-government-backed) loan, there are other out-of-pocket costs when buying a home.

“Through my experience, when people hear zero down payment, they think that means there are no costs for obtaining the loan,” Bullard says. “People don’t realize there are still fees required to be paid.”

According to Bullard, those fees include:

  • Inspection: $300 to $1,000, based on the size of the home
  • Appraisal: $375 to $1,000, based on the size of the home
  • Homeowners insurance premiums, prepaid for one year, due at closing: $300 to $2,500, depending on coverage
  • Closing costs: $4,000 to $10,000, depending on sales price and loan amount
  • HOA initiation fees

So don’t let a seemingly insurmountable 20% down payment get in the way of homeownership. When you’re ready to take the plunge, talk to a lender or submit a loan application online. You might be surprised at what you qualify for.

Janet Berry-Johnson
Janet Berry-Johnson |

Janet Berry-Johnson is a writer at MagnifyMoney. You can email Janet here

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Student Loan ReFi

Why I Refinanced My Student Loans — Twice

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

 

Refinancing your student loans can be a great way to accelerate debt repayment or free up some of your monthly budget. I recently refinanced my student loans for a second time, which was a strategic move to improve my overall financial health.

Here’s why I think this can be a smart idea, if you do it at the right time in the right way.

What Is Student Loan Refinancing?

If you’re new here and wondering what refinancing even is, allow me to explain. When you refinance your student loans, you essentially apply for a new loan so that a new lender will buy out your current student loans and give you a new loan with better terms.

“Better” terms depends on what your goal is. For many people, getting a better loan means getting a lower interest rate. If you want to save hundreds of thousands of dollars of interest over the life of your loan, refinancing is a great way to do that. You can structure your loan to pay it off faster at a lower interest rate. This might mean higher monthly payments than you’re used to but a much lower cost of your loan overall.

If you’re having trouble paying your student loans and your monthly payment is too high right now, you can also refinance your student loans to lower your monthly payment. So if you’re on a 10-year plan now, you could refinance to a 15- or 20-year plan to spread out your payments until you get on better financial footing.

Why I Refinanced Twice

About a year ago, I refinanced my federal student loans with SoFi because I wanted to get a better interest rate and pay off my loans faster. My student loans totaled $33,000 with an interest rate of 6.8% with 15 years left on the loan. My monthly payment was around $295 a month. I dropped over a half a percentage point in the interest rate to 6.25% and chose to pay off my loans in 7 years, which increased my monthly payment to about $485. Had I stayed with this loan, I would have saved almost $12,000 in interest fees over time.

I paid my monthly payments dutifully every month, but when my husband and I recently sat down to plan an aggressive debt payoff using the snowball method, we realized that I had been a bit too aggressive with my initial refinance.

Essentially, we wanted to throw as much money as possible at our high-interest debt. Our student loans were at manageable interest rates compared to our credit cards, and we wanted to restructure things a bit to free up more cash.

After receiving a refinance advertisement from College Ave in the mail, I decided to see if I could refinance my student loans and my husband’s graduate school loans with them. It had been only a year or so since my first refinance, but I was still interested. For the record, I tried twice previously to refinance my husband’s loans with SoFi, but they didn’t like his current salary as a medical resident, and they said I was not a qualified co-signer.

Well, luckily College Ave thought I was, so I was able to refinance both my student loans and my husband’s graduate school loans with College Ave. Our interest rates remained the same but I was able to customize a payoff plan that works well with our current debt snowball.

Basically, I chose a plan that allowed us to make graduated payments, so my payments for the next two years are significantly lower than they used to be. That gives me two years to knock out some of our credit card debt without worrying about having large student loan payments.

The Benefits of Student Loan Refinancing

In addition to getting longer or shorter payoff periods and better interest rates, there are other reasons why you might choose to refinance your student loans. For example, if you co-signed your student loans with your parents, sometimes student loan refinance companies will let you get a new loan entirely in your name, getting your parents off the hook.

Many people also refinance their student loans to be more organized. If you have several different student loans and bills with a mixture of interest rates, consolidating your student loans allows you to finally have one monthly bill with one interest rate in one place. This helps reduce the possibility of being late on your payments.

Things to Watch Out for Before You Refinance

While I’m obviously an advocate of refinancing, it’s important to know the downsides as well. The main downside is that if you refinance to a private company from having federal student loans, you lose a lot of the flexibility and perks of the federal student loan system.

Not all private lenders have as many repayment options as federal loans have, and most of them do not offer the perks that come with income-based repayment. For example, my husband’s medical school loans are under the income-based repayment plan called REPAYE, where the government is subsidizing his interest payments (several hundred dollars a month). This is not a perk I was willing to give up, but I was happy to refinance his private graduate school student loans to another private lender with better terms.

It’s Easier Than You Think

I know that switching student loan providers might sound like a complicated process, but with all the online financing companies available now, it’s easier than ever. The process to apply to refinance my student loans took less than 20 minutes both times.

Just make sure to have some identification documents on hand, like your driver’s license and Social Security card, to keep the process running smoothly. After my application was approved, it took about two weeks for my student loans to be completely moved over. Plus, since my new servicer paid off my own loans, that counted as a “payment,” which freed up even more cash this month.

Ultimately, student loan refinancing can be a strategic tool you can use when it comes to bettering your finances and getting out of debt faster. As long as you understand the process, ask to make sure you’re aware of any possible fees, and double-check that the process runs smoothly, you could be well on your way to financial freedom just by adjusting your interest rates and your payments on your student loans.

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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Pay Down My Debt, Personal Loans, Reviews

Best Egg Personal Loan Review

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Best Egg Personal Loan Review

Updated October 5, 2016

Best Egg is a personal loan company trying to make the borrowing process fast and simple for people looking to refinance credit cards or who need funds for personal use. In this review, we will examine the costs and loan application process for applying for a loan through Best Egg. We encourage everyone to shop around for the best rate, and you can find the best personal loans here.

Overview

Best Egg offers unsecured personal loans. These are installment loans with a fixed monthly payment for the life of the loan, but like a credit card, are not secured with property such as a car or home. Meaning you don’t have to provide collateral in order to receive a loan.

Best Egg offers loans up to $35,000 with up to a 5 year term. Your interest rate is determined by your credit history and can range from 5.99%-29.99% with an origination fee ranging from 0.99%-5.99%.

Best Egg loans are originated through Cross River Bank, which is located in New Jersey. You do not need to be a New Jersey resident to apply for a Best Egg loan.

Pros

The best features of Best Egg are the simple terms and competitive interest rates for borrowers with a strong, positive credit history. Beyond the interest charge and origination fee, there are virtually no fees with Best Egg.

The company charges $15 for a late payment and $15 for a returned payment, which is lower than the typical $25 fee. There are no application fees and the origination fee is deducted from your starting loan proceeds, so there is no out-of-pocket cost to get started. However, this does mean you need to factor in the origination fee when you request the amount you need for a loan.

There are no pre-payment fees, so if you are able to make extra payments or pay off your entire balance early, you will not be charged any additional fees.

Cons

Best Egg only offers payback periods of 3 years or 5 years. If you want a shorter loan payback period than 2 years or a longer payback period than 5 years, Best Egg will not meet your needs.

As a borrower, your interest rate is based on your credit score and is locked in at the time of origination. While some borrowers may qualify for a 5.99% interest rate and 1% origination fee, Best Egg does not disclose the requirements to qualify for its best rates.

Even at 1%, the origination fee is certainly a negative considering other personal loans like SoFi offer no origination fee and no pre-payment penalty.

The highest interest rates are nearly 30% with a 6% origination fee. These rates are comparable to the worst credit card interest rates and may not offer you any benefit compared to using a credit card, which has no origination fee.

At the worst interest rates, this is still much better than typical payday loans or auto title loans, but you may have lower cost options available including lending platforms like Avant.

What Do I Need to Qualify?

Best Egg loans are approved based on your credit history. If you qualify, you are assigned a letter grade which corresponds to an interest rate between 5.99% and 29.99%. Current rates are available here.

The application process requires giving your email, and Best Egg uses a “soft pull” on your credit report to determine whether you qualify and find out your interest rate. A soft pull does not impact your credit score.

When you apply, you will need your Social Security number and current contact information handy for the application process, which is typical for any loan application.

Who is this Best For?

If you have credit card debt with a high interest rate, refinancing with Best Egg could save you a lot of money on interest over the life your debt. If you can lower your interest rate and set a fixed payback period compared to the open ended time frame on a revolving credit account, you could easily save thousands of dollars.

The site suggests using loan proceeds to help pay for a move, vacation, home improvement, debt consolidation, home purchase, or vehicle purchase. This product may save you money compared to credit cards, but it is a best practice to avoid debt where possible, particularly for optional luxury purchases like a vacation.

What About the Fine Print?

One of the biggest benefits of using Best Egg compared to competitors is that loans with Best Egg do not come with a mountain of fine print. There is almost no fine print actually.

You do not pay unless you get a loan and the only fees you will encounter are the origination fee and from late payments and rejected payments from your bank account. That is really it. There is no catch.

Unless you’re in Massachusetts, then the fine print states that your minimum loan amount is $6,000.

Alternatives

Shop for Multiple Offers at Once with LendingTree

[Disclosure: LendingTree is the parent company of MagnifyMoney.]Every personal loan company has its own unique underwriting and pricing rules. That means you can get very different loans offers from different lenders – regardless of your credit score. We recommend starting your search with LendingTree. With just one application form, dozens of lenders will compete for your business. LendingTree uses a soft credit pull – which means you can get multiple rates from multiple lenders without hurting your score.

People with excellent credit can find low rates (even below 6%) because lenders like SoFi participate in the LendingTree program. But don’t worry if you don’t have excellent credit – there are many lenders participating in this program who accept people with less than perfect credit. It should take less than five minutes to see if you qualify. And most lenders can fund the loan quickly – and directly to your banking account.

Always Shop Around

It doesn’t hurt your score to see your offer with Best Egg, but there are other personal loan providers who also offer a soft pull. Don’t just take the first offer you receive. You should always be shopping around for the best possible rate, especially because lenders offering a soft pull don’t harm your credit score.

Eric Rosenberg |

Eric Rosenberg is a writer at MagnifyMoney. You can email Eric at eric@magnifymoney.com

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News, Personal Loans, Student Loan ReFi

Marketplace Lenders Continue To Attract Venture Capital, Talent and Customers

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

MagnifyNews-02-01

This week, marketplace lenders demonstrated that they still have the ability to raise venture capital and attract high profile talent. A series of announcements made clear that competition will continue to intensify, and the risk to the traditional banking sector will only increase. Here is a roundup of the announcements making news this week.

SoFi Surpasses $4 Billion In Funded Loans And Hires Arthur Levitt

Last week, the Wall Street Journal reported that SoFi had raised $1 billion of equity capital. This week, SoFi made more news. The business announced that it has originated more than $4 billion of loans. SoFi created the student loan refinancing market and has quickly achieved market dominance. The business has recently expanded its product set to include personal loans and mortgages. SoFi has been able to grow aggressively thanks to its transparent application process, low interest rates and investment in customer service. The company is the only lender to have received an A+ Transparency Score from MagnifyMoney.

Arthur Levitt, the longest service Chairman of the SEC, will become an advisor to SoFi. Although marketplace lenders have their roots in Silicon Valley disruption, the most successful businesses have been able to attract members of the global financial elite to their advisory boards. LendingClub has had a long relationship with Lawrence Summers, the former Treasury Secretary. As marketplace lending grows, the regulatory environment will become increasingly important. Seeking the counsel and connections of former regulators and government officials will be critical to driving a successful industry.

CommonBond Raises $35 Million

CommonBond is a marketplace lender focused on bigger ticket debt associated with graduate degrees. The business targets doctors, lawyers and MBAs early in their career and with a lot of debt. The business raised $35 million in its Series B round, and plans to use the capital to expand its team to 60 employees, enhance it technology platform and acquire customers.

Orchard Raises $30 Million

Orchard Platform provides technology and resources to marketplace lenders. Given the increasing number of marketplace lenders, Orchard has seen demand for its technology and services soar. The capital will be used to expand its product set, team and marketing.

Fundbox Raises $50 Million

Fundbox is a factoring business that provides invoice cash advances to small businesses. This week it announced a $50 million Series C fundraising with participation from Amazon CEO Jeff Bezos. One of the biggest problems facing small businesses is cash flow while waiting to get paid by customers. Factoring is one of the oldest forms of lending, having originated in Babylonian times. Today, a number of Silicon Valley companies are trying to bring modern technology and analytics to the factoring model. Bezos would be particularly interested, given the number of small businesses actively selling on the Amazon platform.

Banks Under Threat, And Join The Game

Marketplace lenders are not really competing with each other. Their real target is the traditional banking sector. Personal loans are being marketed as cheaper ways to deal with credit card debt. LendingClub advertises that it enables customers to reduce the interest rate on their debt by 31%, on average. Within small business lending, companies like Funding Circle are stealing lucrative small business credit card customers by offering lower interest rates and more cash. Every high margin business of a traditional bank is under attack. Although the volume of business by marketplace lenders is small relative to traditional banks, it is growing exponentially. Over the next 24 months, big banks are going to start to feel the pressure.

And some big banks are already joining the competition. Discover has rapidly become a leading online bank and online lender. Goldman Sachs has recruited a team, and is building out its loan capabilities. And even smaller banks are starting to compete with Silicon Valley companies. Laurel Road (formerly known as DRB), a Connecticut bank, just surpassed $1 billion of student loan refinancing booked.

For consumers, the amount of choice is increasing dramatically. On paper, the four biggest banks dominate the United States market. However, the range of choices is growing dramatically to the benefit of borrowers, savers and investors everywhere. As this week has demonstrated, that competition will only increase.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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Personal Loans

SoFi vs Prosper Personal Loans for Good Credit

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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If you have a good or excellent credit score (above 700), you’re in a good position, as most personal loan lenders are looking for borrowers in that range. You’ll have your choice of terms to choose from when it comes to applying with different lenders.

Speaking of which, we’re comparing two such lenders today: SoFi and Prosper.

SoFi* has quickly been gaining traction in the online lending industry since last year, and currently offers some of the best rates out there for personal loans.

Prosper, on the other hand, is a peer-to-peer lender. Individuals can choose to invest their own money to help borrowers out – the money doesn’t come from an institution.

Both lenders require good credit to be approved, so let’s take a look at the differences and similarities between the terms each offers its borrowers.

Comparing the Terms

Since you (hopefully) have good credit, you should be looking to score the lowest rates possible. Which lender has the better APR?

SoFi’s current fixed APR range is from 5.49% – 14.24% and variable APR range is 5.17% – 11.32% with autopay, and Prosper’s current APR range is from 6.68% – 35.36%. Both lenders offer fixed interest rates.

That’s quite a difference, but remember that Prosper is a peer-to-peer lender. The loans are a bit riskier for investors to take on. If you have excellent credit (750+), you’ll be looking at the lowest rates offered, so don’t be alarmed at the 35.36% end of the spectrum.

SoFi offers loans ranging from $5,000 – $100,000, and Prosper offers loans ranging from $2,000 – $35,000.

SoFi also offers terms of 3, 5, and 7 years, while Prosper only offers loans for 3 or 5 year terms.

However, Prosper has an origination fee on its loans and SoFi doesn’t. Depending on your credit grade, you’ll be charged anywhere from 1% – 5% for this fee. That means you’ll receive less money in the bank, as the origination fee is taken out before disbursement. Be sure to factor in the origination fee when you state how much you need to borrow.

Credit Score Minimums

To apply for a loan with Prosper, you need a minimum credit score of 640 (it uses Experian to get your credit score). When you post a listing for a loan with Prosper, your credit is not affected. A credit inquiry will only be conducted if your loan is funded by investors.

With SoFi, you should generally have a FICO score of 700+. It doesn’t have rigid requirements (and it takes other factors into consideration), but the higher, the better. If you have a strong repayment history, that will make you a more attractive borrower. When you initially apply for a loan with SoFi, a soft credit inquiry occurs, so you don’t have to worry about hard inquiries with either lender when you’re shopping around.

Eligibility

Prosper doesn’t currently offer loans in Iowa, Maine, or North Dakota. SoFi doesn’t currently offer loans in Idaho, Louisiana, Mississippi, Nevada or Tennessee.

SoFi requires borrowers to be employed at the time of applying, and borrowers must also be 18 years or older, and a United States citizen. Prosper only requires that applicants be U.S. residents in a state where its loans are available.

Keeping an Eye on Those Fees

As mentioned previously, Prosper charges an origination fee on its loans, ranging from 1% – 5% of the loan amount.

It also charges a failed payment fee of $15 if a scheduled payment doesn’t go through.

Additionally, a late fee of $15 or 5% of the monthly payment (whichever is greater) is charged after a payment is 15 days late. For a full view of what happens if you’re late on a payment, Prosper offers borrowers a late payment schedule they can refer to.

SoFi doesn’t have any fees associated with its loans except for a late fee, which is $5 or 4% of the amount due, whichever is less.

Neither lender has a prepayment penalty, which is great news if you’re able to pay extra some months. Doing so will lessen the amount you’ll pay in interest over the life of the loan.

Application Process

As with many online lenders, SoFi and Prosper both have applications available online that are simple to fill out. These applications are less of a hassle to complete as opposed to the process of applying for a loan with a traditional bank.

Both lenders will give you the rates you qualify for after filling out the initial application.

With SoFi, you can choose to accept your terms, and move on to receive your funds.

APPLY NOW Secured

on SoFi’s secure website

Prosper’s loan process is a bit more involved, as investors must commit to funding your loan. It also has three loan verification stages borrowers must complete before their loan can receive funding.

Prosper loans are listed for 14 days. If a loan is funded before then, it will move along in the process. If a loan doesn’t receive the necessary funding in that timeframe, then it will be removed. Borrowers are welcome to reapply and go through the process again if their loan isn’t funded.

Various documents are needed when applying for a loan with either lender, but these documents will vary based on your personal situation. It’s recommended to at least have proof of income and employment ready.

What Can You Use a Personal Loan For?

Personal loans can be used for just about anything, from a wedding, to improving your home, to paying for part of your education.

Those looking to consolidate or refinance their consumer debt may turn to personal loans to get better interest rates as well. If you’re able to get a 5.95% APR with SoFi, that’s likely less than the APR you have with a credit card lender. You’ll save a lot more money going with SoFi’s loan if you’re able to save 8% or more off your APR.

Which Company is Better?

Having good or excellent credit opens many doors for you in terms of which lenders will approve you. That makes shopping around for the best rates even more important. If you can save money on your personal loan, you might as well! Both products are also top-notch with transparency, although SoFi does edge out Prosper with an A+ vs an A.

Between SoFi and Prosper, SoFi is probably the better choice. It offers lower interest rates (with a lower cap), which makes a difference on the affordability of the loan. You want to pay the least amount possible over the life of your loan, and a lower interest rate will help with that.

Additionally, it has an extra 7 year term option that Prosper doesn’t offer, just in case you need a bit longer to pay off your loan.

Its funding process is also much simpler and quicker, and SoFi actually offers unemployment insurance. That means if you lose your job, you might be able to qualify for a forbearance period (during which no payments are required) while you get back on your feet.

Remember, when applying for any loan, you need to look out for yourself and your best interests, as lending companies won’t. Do your due diligence and obtain different quotes. Many lenders will only conduct a soft inquiry on your credit to start, making it even more worthwhile to shop around.

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Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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Personal Loans

How to Apply for a Loan with SoFi

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

SoFi_lg

Updated October 6, 2016

SoFi* is currently one of the leading lenders out there. While the company got its start by offering refinancing options for student loans, it has since branched out to offer personal loans, mortgage loans, and MBA loans.

SoFi’s terms are competitive, but its underwriting process is also stringent. SoFi’s personal loan earned an A+ transparency score rating from MagnifyMoney for its simple process, lowest fees and affordable interest rates.

If you want to apply for a loan with SoFi, here’s what you need to know.

Overall Application Process

SoFi* makes it extremely easy to apply for a loan, as everything occurs online. To get started, you just need to sign up for an account on its website.

If you need to submit any documents or forms throughout the process, you can scan and upload them.

Typically, you’ll be able to review the rates you’re approved for immediately after you submit your application for review.

For the most part, there aren’t any application or origination fees to worry about, and SoFi initially only conducts a soft pull on your credit. This means your credit won’t be negatively affected by applying for a loan.

You’ll also have access to live customer support each day of the week. If you run into any problems during the application process, SoFi representatives can assist you.

How to Apply to Refinance Your Student Loans with SoFi

Right on SoFi’s homepage is the bold statement that on average, members have cut their student loan debt payments by $11,783 by refinancing.

Variable rates range from 2.795% – 6.72% APR, and fixed rates range from 3.35% – 6.74% (these APRs reflect being enrolled in autopay). These are some of the lowest rates offered in the industry, and loans are available on a 5, 10, 15 or 20 year term.

Additionally, you can refinance both federal and private student loans, though you should know what benefits you’ll be giving up if you decide to refinance your federal loans.

Should You Refinance?

Refinancing your student loans can be a good option if you currently have high interest rates. Refinancing to lower interest rates will lower the amount you’ll pay over the life of your loan.

You also won’t have to worry about keeping track of multiple payments. You’ll only make payments to SoFi after refinancing.

Carefully consider if it’s worth giving up the numerous repayment options you have available to you if you have federal student loans. These go away when refinancing with a private lender.

[Click Here to Read About Student Loan Forgiveness Programs]

Are You Eligible?

If you’re wondering about your eligibility, it helps to have a good financial track record and a credit score above 700.

SoFi doesn’t solely take your FICO score into account – it considers your educational background, your employment history, your salary and cash flow, and your credit history. However, it doesn’t hurt to have a credit score on the higher side, and being free of any late payments on your record will also help.

Beyond that, SoFi lists the following requirements to be eligible to refinance your student loans with them:

  • You need to be the age of majority in the state you reside in
  • You need to be a United States citizen (or your co-signer must be a US citizen)
  • You need to be able to enter into a binding contract
  • You are currently employed, or have an offer of employment that starts within 90 days of applying
  • You graduated from an eligible Title IV accredited university or graduate program
  • You passed the bar exam and are licensed, if applying as a graduate of a law program
  • Currently, SoFi doesn’t offer refinancing to those in Nevada, and Minnesota and Tennessee residents don’t have access to variable rate loans
  • The minimum loan amount you can refinance is $10,000, and this may be higher in specific states due to legal requirements

If you’re wondering whether or not your school is eligible, go through the application process. You’ll be required to select your school from the list of available ones. If it’s not on there, SoFi encourages potential borrowers to call in. Representatives will be able to double check if your school is on the list.

If you’re a recent graduate, SoFi will also honor the existing grace periods of any loans you refinance..

The Application Process

SoFi outlines its entire student loan refinancing application process here:

SoFi Refinancing Process Screenshot

As you can see, it’s simple and quick! You should be done in 15 minutes or less. Once you’ve completed the application, you’ll be able to review the rate and term you were approved for.

Should you decide the move forward, SoFi will do a hard credit inquiry, and you might be required to submit additional paperwork for verification purposes.

According to SoFi’s blog, you might be required to submit the following documents during the application process:

  • Income verification (paystub within last 30 days)
  • Identity information (driver’s license, birth certificate, military ID, US passport, social security card, certificate of citizenship, certificate of nationalization)
  • Address verification (utility bill, bank statement, credit card bill)
  • Loan statement 

How long does the overall funding process take? After you sign the electronic agreement, around 7 to 10 days. The amount of time it takes depends on how long your current lenders take to process and apply the funds to your account.

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How to Apply for a Personal Loan with SoFi

SoFi offers personal loans at fixed rates starting at 5.49% APR (if enrolled in autopay), with terms of 3, 5, and 7 years.

Once again, you can apply to check your rates without worrying about your credit score. SoFi only does a soft inquiry.

[Read Full SoFi Personal Loan Review Here]

Do You Need a Personal Loan?

Personal loans can be a good idea if you need money and don’t have time to save up for it, or if you’d like to pay off any high interest rate debt you have.

Examples of what you can do with the money include making improvements on your house, buying a car, funding your wedding, or going on a vacation.

SoFi’s personal loans are at a lower rate than credit cards, and they have some of the best rates in the personal loan industry as well.

Are You Eligible?

In order to be considered for a personal loan, SoFi requires that potential borrowers be:

  • United States citizens or permanent residents
  • The age of majority in the state they reside in
  • Currently employed
  • Looking for an amount between $5,000 and $100,000

SoFi doesn’t offer personal loans in Louisiana, Mississippi, Nevada, and Tennessee.

The Application Process

The process for applying for a personal loan with SoFi is much the same as refinancing student loans. You apply online and get the rates you’ve been approved for within minutes. SoFi says you’ll receive the funds within two days of signing the electronic agreement.

SoFi Personal Loan App

SoFi offers yet another quick and simple application process with its personal loans.

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How to Apply for a Mortgage Loan with SoFi

SoFi’s mortgage loan is fairly flexible compared to traditional banks. It only requires that you put 10% down (versus the standard 20%), it doesn’t require PMI on any of its loans, and applications are typically closed within 21 days.

As is the case with its other loans, you may apply to receive the rates you’re eligible for before committing to a full application.

Speaking of rates, the rates for a 30 year fixed mortgage range from 3.245% – 6.370%, depending on the down payment you have.

Rates range from 2.870% – 5.870% on 15 year fixed mortgages.

Are You Eligible?

SoFi takes your credit history, your debt obligations, your assets, your debt-to-income ratio, the loan-to-value ratio, and your income into consideration when you apply for a mortgage loan.

SoFi only offers mortgage loans in the following states: AL, CA, CT, DE, DC, FL, GA, IL, IN, MD, MN, NH, NJ, NC, ND, PA, RI, TX, VT, VA, WA, WI and WY.

The Application Process

To apply for a mortgage loan with SoFi, you’ll go through a 5-step application process, as seen below:

SoFi Mortgage Application Process

Pre-qualification happens in less than two days, and SoFi will initially do a soft credit pull. You’ll be required to submit income verification and any other documents requested, such as the details of the property you’re interested in.

SoFi will then review the details and conduct an automated valuation of the property. It aims to give borrowers an offer letter in less than 48 hours.

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Always Shop Around for the Best Rates

You’ll likely get a competitive deal if you’re eligible and apply for a loan with SoFi, but that doesn’t mean you should accept the first offer that comes your way.

If your credit is in great shape, shop around to see if other lenders can do better. As many lenders are initially only conducting soft credit inquiries, it won’t harm your credit to check.

Shopping around for the best rates is simply being a smart consumer. You should always be trying to lower your interest rates, as it directly affects how much more you’ll be paying over the life of your loan.

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Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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Personal Loans

SoFi vs LendingClub: Which is Better If You Have Good Credit?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Student Loan Mod_lg

Updated March 4, 2016

If you have good or excellent credit, you have your choice of options when it comes to taking out a personal loan. This is good news, as there are plenty of affordable options out there, and you’ll be able to take advantage of great interest rates.

SoFi * is one of the leading options for personal loans out there right now, especially if you have good credit.

LendingClub* is actually a peer-to-peer lender. This means investors are loaning you their money. Lending Club states this allows lower rates to be passed down to borrowers: “Borrowers who used a personal loan via LendingClub to consolidate debt or pay off high interest credit cards report in a survey that the interest rate on their loan was an average of 6.8 percentage points lower than they were paying on their outstanding debt or credit cards.”

If you have good credit, which company is the better choice? Let’s review each and see how they compare.

SoFi vs LendingClub: Comparing the Terms

The most important factor, of course, is the APR available to you from each of these lenders.

SoFi currently offers a fixed APR range of 5.49% – 14.24% and variable APR range of 5.17% – 11.32% (if enrolled in Autopay) on its personal loan, while LendingClub offers an APR range of 5.99% – 35.89%. However, if you have a good credit score, then you should be looking somewhere in the middle of that range.

SoFi offers loans ranging from $5,000 – $100,000, while LendingClub offers loans ranging from $1,000 – $40,000.

LendingClub offers loans up to 5 years, whereas SoFi will lend up to 7 years.

What does this look like on paper? If you take out a $10,000 loan with SoFi on a 3-year term with an interest rate of 5.50%, your monthly payment will be $301.96. You’ll pay a total of $10,870.56.

If you take out the same loan with LendingClub, with an interest rate of 6.50%, your monthly payment will slightly increase to $306.49.

SoFi vs LendingClub: Credit Score Minimums

SoFi doesn’t have a clear-cut minimum credit score, but it’s recommended to have a score of 700 or greater. Those with strong repayment histories will also have a good chance at getting approved, as SoFi doesn’t approve applicants based off of FICO score alone.

LendingClub’s minimum credit score is 600 for its personal loan.

SoFi vs LendingClub: Fees to Watch Out For

SoFi doesn’t have any fees associated with its loans. Not even an origination fee.

However, a late fee will apply if you’re 15 days past due on your payment. This will be the lesser of $5 or 4% of the amount due.

If you’re unable to make a payment because of a job loss, you should contact SoFi immediately. You could be eligible for the Unemployment Protection service it offers. This grants you forbearance, so you don’t have to make payments for a set period of time. However, the interest on your loan would still accrue.

[Read Full SoFi Review Here.]

LendingClub has the following fees:

  • Origination Fee: Ranging from 1%-6%, depending on the loan grade you receive.
  • Late Payment Fee: LendingClub gives borrowers a 15-day grace period for making a payment on their loan. On the 16th day, a late fee will be assessed. The amount of the fee is the either $15 or 5% of the unpaid installment amount, whichever is greater.
  • Check Processing Fee: This $15 fee only applies if you wish to pay by check. LendingClub allows borrowers to make automatic payments with direct debit.
  • Unsuccessful Payment Fee: A $15 fee is charged if your automatic payment to LendingClub is unsuccessful (i.e. there’s not enough money in your account to cover the payment, or if you closed your bank account and didn’t update your information).

[Read Full LendingClub Review Here.]

There is no penalty for paying off your loan early with LendingClub or SoFi. If you can afford to, you’ll pay less over the life of your loan if you make more than the minimum payment amount.

SoFi vs LendingClub:  Eligibility Requirements

For both SoFi and LendingClub, you must be 18 years or older, and be a United States citizen. SoFi also requires you to be currently employed.

SoFi personal loans aren’t offered in the following states: Idaho, Louisiana, Mississippi, Nevada and Tennessee.

LendingClub is unable to offer loans to those who reside in the following states: Iowa and West Virginia.

SoFi vs LendingClub: Application Process

SoFi and LendingClub have applications that you can complete online. Both are straightforward and easy to fill out, in case you need the loan quickly.

If required, you’ll be able to upload any documents requested. You should at least be prepared with proof of income.

After filling out the application, you’ll be presented with your rates. If you choose to move forward with a loan, then you should receive the funds within the next few business days with SoFi, or within 7 business days with LendingClub.

Neither application process is as time-consuming as getting a personal loan with a bank.

Both SoFi and LendingClub Conduct a Soft Pull on Credit

LendingClub and SoFi allow you to check what rate you’ll qualify for with a soft pull on your credit. That means your score won’t be affected.

This is great for you as a borrower, because you can shop around and get the best rates possible before committing to a loan.

SoFi vs LendingClub: What Can You Use the Loan For?

According to both sites, a popular reason for taking a personal loan out is to consolidate debt or pay off credit card debt. Both companies boast that it offers lower rates than what borrowers would get if they kept their credit cards, which is mostly likely true if you have good credit.

Personal loans can be used for almost any purpose. If you need extra help funding your vacation, wedding, down payment on a home, or education, personal loans can help.

SoFi

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Lending Club

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SoFi vs LendingClub: Which Company is Better?

If you have good credit, you should shop around for the best rates. That said, between SoFi and LendingClub, SoFi will likely be the better bet.

As it has a better APR range, you’re going to pay less over the life of your loan if you can actually get the lowest rate available. Additionally, SoFi’s maximum loan amount is much greater. If you have more debt to consolidate or pay off, that increased amount will help cover the excess.

Again, SoFi offers unemployment insurance, which can help you out in the event you lose your job and are unable to make a payment on your loan. It also offers job placement help if you have trouble finding a new job.

The bottom line: look out for yourself. With good credit, you should be able to get approvals from just about any lender, so be sure to check around. You want the best rates possible so you pay the least amount.

promo-personalloan-wide *We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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Pay Down My Debt

7 Financial Startups That Want You to Get Out of Debt

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Geeting advice on future investments

There has been a wave of new financial startups in recent years. From incredible investing apps to innovative money software, it seems like the sky is the limit when it comes to what entrepreneurs can create in terms of financial services.

Of course, some of my favorite financial startups are the ones that directly help consumers get out of debt. Credit card debt is a massive problem in the United States. There is so little financial education about getting out of debt and with interest rates skyrocketing, uninformed consumers could be paying off their debt for a very, very long time. Fortunately, innovative financial startups have started to address how to help Americans ditch debt.

Ready for Zero

I currently use Ready for Zero to assess my student loan debt. What I like about Ready for Zero is that it syncs with your actual accounts so there’s no disconnect between the debt you think you have and the debt you actually haRFZve.

I entered in the user name and password for my federal student loans, and Ready for Zero showed me just how long it would take to pay those bad boys off by paying the minimum. Move the circles to the left or right to adjust the numbers and find out how much you will save in interest by paying above the minimum. Although I knew empirically that I needed to be paying above the minimum, Ready for Zero was a real wake up call for me and showed me that I really needed to get on track and put more efforts towards my loan payoff.

Payoff*

Payoff is an incredible financial services company that helps you payoff your credit card debt. Basically, it takes all your information and they offer you a consolidation loan so that instead of worrying about 9 different credit cards with varying interest rates, you can instead just pay one monthly fee.

The negatives of Payoff is that they are only for credit cards at this time so if you had several personal loans or several student loans, they can’t offer you a consolidation loan for those.

Payoff does a soft pull of your credit report to determine your loan rate. A soft pull means it won’t hurt your credit score to find out your loan rate. Payoff provides loans at rates between 8% APR and 22% APR. The rate you’re offered in prequalification is subject to change, but it gives a good sense about whether or not moving forward with Payoff would be right for you.

You also get to talk to a real person when you call Payoff, which can’t always be said of your credit card company’s customer service.

Level Money

I recently learned about Level. It’s similar to Mint, but with a cleaner interface. Level is a free app that helps you by integrating all of your bills, income, and other banking information and then calculates how much you can spend in a day. It also calculates how much extra cash you saved if you come in under budget so you can use that to pay off your debt at the end of the month. Basically, Level is the simplest and easiest form of budgeting if you’re new to the game and want to use budgeting as a tool to help pay down debt.

SoFi*

What I like about SoFi is that they refinance student loans, issue personal loans, and mortgages.

One of the interesting things about SoFi is that it offers a valuable network of entrepreneurs. If you borrow money for your MBA, it actually offers complimentary career coaching for SoFi members. The only downside is that it’s only available at specific universities. So, if you are thinking of going into debt for school, just know there are other options and customizable solutions to reduce the impact of that debt, ones that actually include career counseling like SoFi as opposed to a random bank or federal loan with minimal customer service.

[Read the full SoFi review here]

Vouch*

Vouch is perhaps one of the most intriguing startups on this list, because they are using a unique and pretty subjective method of determining your credit worthiness. As the name implies, your friends and family vouch for you. Vouch can ask your friends and family to agree to pay money towards your loan if you run into trouble paying it, but it isn’t required that someone who vouches for you is a guarantor. The more people who vouch for you and agree to help you if you run into money trouble, the lower your interest rate will be. By doing this Vouch is able to give you a better interest rate and spread out the risk for them as a company.

[Read the full Vouch review here]

Earnest*

I love Earnest because it’s another loan company taking much more into consideration than just your credit score. It’s refreshing to read about a company that wants to get to know its customers. After an extensive process reviewing your financial and work history, Earnest will offer you an interest rate for your personal loan based on your total picture. They even check out your LinkedIn profile as part of its process!

Earnest favors borrowers who don’t max out their credit card and who are well educated. Unfortunately their loans aren’t available in all 50 states, but they are growing. Right now, Earnest is offered in the following states: California, Colorado, Connecticut, Florida, Georgia, Illinois, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Tennessee, Texas, Utah, Washington, Washington D.C., and Wisconsin.

There no penalty for pre-paying, a major plus for those dedicated to digging out of debt fast. You don’t need a lengthy credit history. You just have to be a responsible person and be able to prove it. 

[Read the full Earnest review here]

Gradible

Many millennials complain that they can’t find work they love or that they don’t earn money to make extra payments on their student loans. Gradible is changing all of that. It partners with different companies (like Craigslist or market research firms) to offer tasks its users can complete.

These tasks pay around minimum wage depending on how quickly you work and the money is applied directly to student loans. You can post things on Craigslist on behalf of companies, you can write articles for blogs, or you can simply “like” a few businesses on Facebook. There are countless tasks to choose from and you can work as much or as little as you like. The best part is that there is no agonizing over whether you should pay towards your student loans or something else because Gradible sends your payment directly to your student loan provider for you.

[Read the full Gradible review here]

Use These Tools to Earn Freedom

So, if you are currently in debt, whether it’s student loan debt like me or extensive credit card debt, there are so many tools to help you get out of it. Whether you consolidate your debt or just become more aware of the impact of your interest rate, use the companies above to help you meet your goals and get on the path to financial freedom.

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*We receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.  

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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