What Is SoFi?
In this SoFi review we will take a look at what SoFi offers and the pros and cons of SoFi. We’ll see is SoFi legit, or is is SoFia scam?
SoFi, like most other niche financial services companies, is expanding. It turns out that once you get a foothold, and a few developers working full-time for you, cranking out “disruptive” finance services is easy. SoFi has a wide array of financial products including loans, banking, investing, and more. Most of SoFi money is legit, but whether it’s better than others is the key.
First, SoFi was a lender. If you scroll to the bottom of their webpage, you’ll see in the fine print that officially, SoFi (the lending part) is SoFi Lending Corp. NMLS #1121636. You see, lending corporations are real things that exist and are also heavily regulated.
Believe it or not, there is no need, nor requirement to be a bank to give out loans. It just means you have to get the money you are going to lend out to people from somewhere besides customer bank deposits. In this case, SoFi investors supply the money the company lends out.
At this stage, SoFi focuses on just a few lending products. SoFi offers student loans, personal loans, and mortgages. No car loans, credit cards, or home equity loans or lines are offered. Recently, they have gone full bank, offering FDIC insured checking and savings accounts.
SoFi Home Loans Review
SoFi mortgages offer low down payments with as little as 5% down mortgages, or 10% down, depending on which webpage you are on. Of course, you have to qualify for the low-down payment, and you have to pay PMI (Private Mortgage Insurance) each month while your mortgage has a loan-to-value ratio above 80%. SoFi offers standard 30-year fixed and 15-year fixed mortgages as well as a 20-year fixed mortgage and even a 10-year fixed mortgage.
Are SoFi mortgages a scam?
SoFi mortgages are legit. Like any lender there is fine print. SoFi mortgages have low rates, or more specifically “competitive rates.” What that means is up to the company and depends upon you and your credit score. The big print says SoFi members save $500 on their mortgage or refinance processing fees. The fine print says you MAY qualify for a discount on mortgage fees.
As far as mortgages are concerned, SoFi only originates mortgage loans in 42 states and the District of Columbia (Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Washington, D.C., Wisconsin, and Wyoming).
Better Mortgage Deals? Pros and Cons of SoFi Home Loans
Where SoFi looks really interesting is the mortgages they offer. For starters, they advertise the ability to get a mortgage with 5 or 10 percent down. That could be huge for a lot of people who don’t have a full 20% down payment. However, it is only for those who are “well-qualified applicants.” In other words, if you have good credit, a solid employment history, and aren’t going over your debt-to-income ratios, you might be in business.
They also say that there are no application fees or origination fees, which is also a good deal. Don’t confuse this with closing costs though, which they do have, and which the company only has limited control over.
SoFi Mortgage Refinancing
SoFi can also refinance your existing mortgage whether you just want to get a lower rate or move to a mortgage with a different term. You can refinance with up to 90% LTV (the equivalent of a 10% down payment). You can get a cash-out refi up to 80% LTV. Again, you may get a discount on your closing costs/fees as a SoFi member.
SoFi Banking Review
Rates up to date as of October 24, 2023.
SoFi’s marketing used to say they were not a bank. Turns out being not a bank is for small time, so now SoFi is a bank. Is SoFi banking good deals? Let’s do a review of SoFi Banking to find out. Now that they embrace the banking level is there a SoFi Bank scam?
- Is SoFi a U.S. Bank? – Grab your magnifying glasses and head to the fine print, my good readers. SoFi is a U.S. bank. It is a member of FDIC, which insures your deposits up to $250,000.
- Does SoFi Provide 1099-INT Forms? Yup. As a U.S. Banks SoFi will provide you, and the IRS, with a form 1099-INT that reports interest earned during the year over $10.
- Does SoFi Provide 1098? Technically, SoFi Bank won’t send you a 1098 Form, but SoFi Mortgage will as long as you paid the minimum amount of mortgage interest $600.
- Is SoFI FDIC Insured? Yes. SoFi is FDIC insured. SoFi also offers additional interest as a brokerage, but that is provided by a diffferent entity and may not cover your bank deposits.
First up, SoFi offers a checking account with a 0.50% interest rate IF you meet certain terms and conditions.
Let’s check out the fine print really quick. Turns out you can earn interest on your checking account, on the first $50,000 you have in your checking account, the first $50,000 you have in your savings accounts, and $50,000 for the cumulative total of all Vault balances. If you split $50,000 across all three accounts, you can earn 1.00% APY on up to $150,000. Everything over $50K in one account, or anything over the $150K total earns a measly 0.05% like you can earn at your local credit union.
Also, you have to have direct deposit, or you don’t get a high interest rate. For those of us who are freelancers and entrepreneurs collecting payments that aren’t necessarily paychecks, you have to be careful with what counts as a direct deposit. Is a monthly transfer from Google AdSense good enough, or does it have to be some sort of W2 check?
Deposits that are not from an employer (such as check deposits; P2P transfers such as from PayPal or Venmo, etc.; merchant transactions such as from PayPal, Stripe, Square, etc.; and bank ACH transfers not from employers) do not qualify for this promotionOpen a Bank Account Online Today | SoFi
So, yeah, too bad for us. However, SoFi does offer a way to get around the direct deposit rule. If you deposit $5,000 every 30 days, then they don’t care if it is direct deposit or not. You’re good.
No-fee overdraft up to $50, but only on debit card purchases. — You should decline overdraft ability on your debit card, and have it rejected when you have no money. Banks have to offer you this choice, but they try and make it sound better for you if your debit card allows the charge to go through and then they hit you with an overdraft fee. In theory this $50 protection helps, but it is better to just have your card declined.
Currently, you can get a SoFi bonus of $100 when you sign up for checking and savings, but again, you have to have direct deposit.
Early Paycheck at SoFi
The newest banking marketing gimmick is the early paycheck. The early paycheck only works when you have direct deposit. It works based on your employer putting your paycheck into the banking system with a to-be-paid date. So, if you get paid on the 15th, your employer might have payroll setup so that on the 13th, all the paychecks get loaded up into the system. Since SoFi can see that your money is coming, they can allow you to access it “early” by letting you start using funds on the 13th instead of the 15th. – Don’t forget to notice the “up to” two days. If your employer only preloads your cheque one day before you get paid, then you can only have one day of early paycheck.
SoFi is more than a lender, it’s also an advisory firm, known legally as “SoFi Finance, LLC, an SEC Registered Investment Advisor,” and also a brokerage called, “SoFi Securities LLC, and affiliated broker-dealer registered with the Securities and Exchange Commission.” (SoFi, does take brokerage deposits, but not banking deposits.)
SoFi Invest Review
Like most of the new mini-brokers SoFi offers an investing app with no commissions. This used to be a differentiator, but these days, many traditional discount brokers have no commission as well. Investing by app makes it seem easier and faster than having to log into a computer, although the process is the same.
The key feature of mini brokers is the ability to buy partial shares, known as fractional shares of companies. In other words, you can invest in stocks even if you don’t want to invest enough to buy a whole share. SoFi calls its fractional shares Stock Bits. Stock Bits are essentially an internal account mechanism that assigns you a partial share. You get partial dividends, partial stock splits, and so on. You do not get a partial vote, although most SoFi investors won’t miss that. Not all stocks are allowed to be bought as Stock Bits.
You can buy stock bits by dollar amount rather than share amount. In other words, you can buy $200 of GM and invest exactly $200, rather than having to buy 4 shares at $53, for example, and ending up with an investment of $212. Unlike regular, full-share, stock trades, Stock Bits trades are only executed once per day around market close, which means your stock price may have changed since you entered your partial share trade. For this reason, there are no-limit orders allowed on Stock Bits. Several companies like Stash and others also offer fractional shares.
In addition to stocks, you can buy ETFs on SoFi. SoFi even has its own branded SoFi ETFs.
SoFi Invest accounts do not automatically reinvest dividends by default. If you want to reinvest your dividends, you need to specify in your account.
SoFi Automated Investing Review
As I often mention here on Finance Gourmet, the best long-term investing strategy is a well-diversified portfolio tailored to your goals and risk tolerance. To this end, or for those who just don’t want to pick their own investments, SoFi offers automated investing. SoFi automated investing is a glorified robo-advisor that invests your money into a portfolio of ETFs, including some proprietary ETFs.
Is SoFi save to invest with? It’s a broker dealer with all the same insurance and regulations as other brokerages. That means your money is safe with SoFin in that they won’t steal it. That does not mean your money is safe from investing losses that you, or SoFi’s investing products, cause.
The automated investing at SoFi automatically rebalances your account via additional contributions. In other words, each contribution is automatically allocated such that it restores your portfolio closer to the original portfolio allocation. If a portfolio drifts by more than 5%, then the portfolio will be automatically rebalanced by buying and selling the necessary ETFs.
The greatest pro of SoFi Automated Investing is a 0% management fee, and no minimum investment. However, its competitors such as Wealthfront and Betterment charge just 0.25%. The difference will be minimal for accounts without larger balances. As always, account holders will pay the cost of the ETFs themselves. SoFi also charges $75 for closing an account.
The greatest con of SoFi Automated Investing is that it does not offer tax-loss harvesting. However, this is only relevant to non-IRA accounts.
In addition to automatic rebalancing, SoFi automated investing supports automatic investments. Automatic investments are limited to $1,000 when coming from an external account (via ACH). Larger amounts, up to $50,000, are allowed if the money comes from a SoFi Money banking account.
SoFi IRA Review
SoFi’s IRAs pair well with its automated investing program, allowing investors to start with any amount and then continue contributing to their IRAs while letting someone else handle the investing. Of course, SoFi IRAs can also be self-traded, and are eligible for Stock Bits to purchase fractional shares.
SoFi Roth IRA
As part of SoFi Invest you may open a SoFi Roth IRA. Like all IRAs, the SoFi Roth must follow IRS rules regarding IRAs including Roth IRA income limits, and Roth IRA contribution limits. I’ll need to add to this SoFi review with more information on the IRA products.
SoFi Traditional IRA
SoFi also offers traditional IRAs, as well as SEP-IRAs for business IRA plans.
What Makes SoFi Different?
It is really hard to be different structurally in the financial services industry. That is by design. Finance is heavily regulated, and for good reason. The legal structure of SoFi is the same as any bank that runs a lending company, advisory company, and brokerage company under the same name.
For the most part, it’s the usual stuff that all banks say make them different. They care more. They have better rates. They have better customer service. You know, all the same stuff all the banks say that makes them better than other banks. You would have to actually open an account to verify the veracity of those kinds of statements.
Not Using FICO Scores
Update: I no longer see the company claiming it does not use FICO scores. I will investigate and update this section.
The one thing that is potentially different, is that the company claims to not use FICO scores. The company markets this as the FICO Free Zone. Instead of using a FICO score, they will look at your whole situation and make a credit determination based on their own analysis, rather than a mathematical score calculated by a computer. Ironically, this is not revolutionary. Instead, this is how they used to do credit in the old days before FICO scores existed.
A bank loan officer would look at all of your papers, statements, and tax returns, and so on, as well as your reputation in the community and then determine whether or not to give you a loan, and at what interest rate. This is where banks became the primary lenders. Not only did they have the money, but if you were a customer, they already knew something about you, like how much you have in the bank, and how often you bounce checks, without even looking at a credit report. As far as I can tell, SoFi still uses your credit report, they just don’t use the FICO score. (Note that the company discloses that it does pull your FICO score and keeps it up to date in their records because their investors might want to know.)
This doesn’t mean that they dish out loans blind to anyone regardless of how bad their credit history is. It just means that they use their own manual criteria rather than use a FICO score. Whether they are more or less lenient in their lending is something you have to take their word for.
Low Rates Cheaper Fees
SoFi does seem to offer lower rates and fees than you’ll typically find if you go into a financial company blind. That is, if you contact a bank or lender without ever having a relationship with them. On the other hand, if you have a hometown credit union that waives fees and gives low rates to existing clients that use other products (like the banking services) then, you might be able to match what SoFi offers.
Get Over $900 Moving Money to SoFi?
The big hype on the front page says I can get up to $930 moving money to SoFi. Can I really get $930 moving my money to SoFi?
To start with, there is our favorite words UP TO, so the only way you are getting $930 to move money to SoFi is if you do every one of the things. Let’s see what those things are.
Looks like you can get $10 for checking what your interest rate would be for a personal loan. You have to agree to a soft pull on your credit score for this.
There is $500 available if you apply for a personal loan, have a SoFi Money account and meet the underwriting criteria. Then you get a $500 welcome bonus in your SoFi money account. (Just FYI, they are going to report this bonus as income to you.)
SoFi has a credit card with 5% cash back for the first 90 days, then it goes back to the normal 2% cash back. You can only earn a maximum of 20,000 rewards points, but you’d have to spend $400,000 and you only have 90 days to do it, so unless you’re buying Ferraris with your credit card, I don’t think you’ll be maxing out that reward, but if you did, 20,000 SoFi rewards points are worth $200 if you put them in certain accounts.
You can get a $100 offer if you have $1,000 or more worth of direct deposit transactions during a 30-day window during the promotion period. The direct deposit has to come from an employer to count.
Get free $10 in Bitcoin. Interesting that this one is so much lower than the others. Theoretically, $100 worth of cash would be the same as $100 worth of Bitcoin on any given day. It’s like the old riddle. Which weighs more, a pound of feathers or a pound of lead? (They both weigh one pound, so it’s the same.) My guess is that they don’t want to look bad if they gave you $10 worth of bitcoin on the first of the month and then it was worth $100 at the end of the month. Otherwise, it should be the same
Anyway, you can get your free $10 of Bitcoin from SoFi by opening a SoFi Digital Assets account and buying at least $10 worth of cryptocurrency with your own money in the first 7 days. Then, they’ll put $10 of Bitcoin in your account. So, really, it’s more like SoFi will match your first crypto investment up to $10.
Finally, you can get a $100 Rate Match Bonus. You have to apply for SoFi student loan for this one.
You can get 250 SoFi Rewards Points for connecting a property to the estimated market value tracker. It seems to work sort of like Zillow by giving you an estimated price for your house. You can only get the bonus once, no matter how many properties you link.
One of many, SoFi fintech offers a host of incentives to attract business while not having local bank branches or brick and mortar bank locations.
I’m just bored enough to try the whole $10 worth of cryptocurrency thing. Check back on this SoFi review and I’ll add a SoFi crypto account review.