Their online application was easy to use, and once it was approved, an electronic deposit for the amount simply appeared in my bank account a couple of days later. The interest rates were low, the terms were easy to understand, and there were no gotchas like front-weighted interest or unexpected fees.
If another company exists that will happily give me a hassle-free, unsecured loan for $50,000 at 5-6% interest, via an easy to use online form, and then deliver the funds in only a couple of days... please, by all means, let me know!
SoFi started as a student loan refinancing institution for low-risk professional pools with Stanford and Harvard alumni. As someone who refinanced their student loans recently with SoFi and shopped around, I can tell you I got the best rate from SoFi.
You seem adamantly opposed to SoFi though. Despite the unfounded accusations in your rant, why are you?
If we literally judge every financial company by their slogan, then we'll be here a while.
I do not know if it's a saturated market yet but it sure seems like it.
I currently have ~$10,000 in credit card debt at 0% interest, no I don't want to refinance that, thank you! (I got the money sitting in a CD when the interest free period runs out.)
If there aren't any, that should tell you something. Their business is not likely sustainable. Good for you if you got those terms, and there aren't any hidden surprises, but that rate with no security seems well below what prudent lending demands.
The interest that banks give on your deposited cash is essentially zero, so even 5-6% leave a decent margin. Not everyone aims to make 25% a year, quite a few want to retain their wealth. This can be a tiny % of their allocation.
(Yeah, I know not all is paid back, salaries, heating bill and all.)
They're also much easier to get substantial unsecured term debt through at a lower price than, say, Prosper or Lending Club.
There is no way your loan payments were reduced and the remaining term cut in half at the same time, unless your original interest rate was above 20-25%.
Anyone with a calculator can tell the numbers don't add up. You're either embellishing or you got scammed.
It's kind of a silly fight, and I'm sure it would help educate a lot of people reading about what is possible.
Then choose r'/r < 1/2 by a sufficient amount. For example: let (P; r; t) be ($100,000; 8%; 30 years). The payment is around $740/mo. Now take (P; r; t) equal to ($100,000; 3%; 15 years). The payment is around $700/mo.
You can adjust for the fact that some months of repayment already occurred so the term reduction is to a new term greater than half the remaining periods on the existing loan and the present value (i.e. new principle) is smaller and bump r' up accordingly to achieve the same result.
Either way it's hardly "impossible" and actually quite easy to do if there's a significant difference between the original loan conditions and the refinance/consolidation.
https://www.wolframalpha.com/input/?i=$100000+3%25+15+year+m...
https://www.wolframalpha.com/input/?i=$100000+8%25+30+year+m...
Again, the specific numbers of your situation would go a long way to shutting up the skeptics here. Either your initial rate was absurdly high, or you're exaggerating.
my knowledge of finance
He had to have received a large rate reduction or made a massive payment on the principle. I don't see how the math would work out otherwise.
People make horrible financial desicions and a lot of companies profit off of them.
Your ego and lack of financial fluency is showing - this scenario is entirely possible.
This is really a low blow and completely uncalled for. I would expect such comments on reddit or Facebook, but not here.
Student loan is quite inefficient, people going to University of Phoenix with low job acceptance rate majors get the same/similar interest rate with people going to Stanford for Computer Science. One side is way more likely to pay back than the other. That side is the horse, while the other one is the burden to the portfolio.
There are for-profit schools which spend 70% or more of their budget to solely marketing. I don't see they are producing good workforces.
Long term value: driving the masses to correctly study things that have higher chances of concretely contributing to society on short - medium term. I think it's quite valuable.
SoFi's way to survive is to collect high quality borrowers which risks are smaller than the average of the student loan portfolio.
Let's say govt gave all 8% (idk the real numbers) for everyone, but there are good students/alumnis in it whose risk are calculated actually as 4%, SoFi would refinance the loan with 5%. 1% margin is for SoFi.
Borrower is happy, SoFi is happy, student loan system gets a slap of reality in the long run & people would realize the inefficiency of the loaning system.
In the next phase after they have gathered the good borrowers, SoFi needs to nurture them to ensure their productivity, while offering other finances if needed. This is still not materialized yet I think. But, acquiring good borrowers & continuously serving them is the holy grail of the business I think.
Another way to frame this is that they tried to properly "price" mispriced securities (which in this case are individuals with loan terms with worse terms than their financial profile should beget them). Students working towards advanced degrees from elite institutions were seen by the traditional lending market as higher risk than what SoFi deduced that they should be "priced" at.
Traditional banks need scale in their businesses an order of magnitude or two compared to a startup. There were quite a few startups whose business model is "we will carve away the most profitable (but small in size) segments of a big bank's client base, and serve those people better".
In offering so many products, what economics of scale do they bring over established banks and credit unions? If there are any newly discovered efficiencies, they certainly aren't passed down to the consumer as the rates I've been quoted for their loan products are terrible; it's shocking that they get any organic business at all.
They call themselves "a new kind of finance company" but there's literally nothing new to benefit the consumer. If anything, they've taken multiple steps back because they're a 1990s boiler room down to their culture, their management, and especially their channel of sales: they masquerade as an "tech company," but really they're just a web form that prints leads to their sleazy call center.
If you tick the boxes of the specific demographic they're going after (High Earners, Not Rich Yet - as they call them at SoFi) and you make the mistake of giving them your information by applying for any one of their products, all the mini-Belforts at the company will relentlessly pitch you over the phone to trust them to manage all of your wealth... for a princely return of 1.18%.
They have no defensible moats, they have no IP, they have no talent on staff. Their Chief Technical Officer is the CEO's wife, who has a 1 year remote degree from Stanford and no prior experience in software. Seemingly her job is just to stand around and pretend everything is "normal" while her husband sexually assaults girls half her age in the room across. How sad.