SoFi personal loan

What happens when you default on your SoFi debt?

SoFi is an online lender offering the largest personal loans available to consumers with good credit. With loans ranging from $5,000 to $100,000, SoFi offers both fixed and variable interest rates and loan terms of two to seven years. Sofi has an A- rating from the Better Business Bureau, with 122 complaints in the last three years. It is also facing a case brought by the FTC  that alleges Sofi made false statements in advertising. Here’s what happens when you default on your SoFi loan.

SoFi, which offers personal, student and even home loans, is a “very sophisticated lender with better criteria, higher-end larger loans, mostly intended for professionals and providing better interest rates than the competitors,” said Michael Bovee, co-founder of Resolve, a company founded to help people in financial distress. “This is good for them and the borrower. They also have strict lending guidelines and offer loans for large balance consolidation.”

Related article: Online lenders often collect debt differently than traditional banks. Here’s what to consider

What if you become delinquent on your SoFi account?

If you’re behind on your loan payments, SoFi’s collection practices will differ from those of credit card companies in several ways:

1. Earlier charge-off 

Your personal loan with SoFi can be charged off after 120 days of nonpayment. This means SoFi reports it as a loss, negatively affecting your credit score. It also means that you may begin hearing from a contingency debt collector or a debt buyer soon, so you’ll need to determine quickly how you will resolve this debt. 

Related article: What does it mean to have my unpaid debt charged off?

2. Does not participate in debt management plans (DMPs)

Your debt resolution options are slightly more limited with online lenders as they typically don’t participate in DMPs. While credit card companies will work with a credit counseling agency to adjust interest rates for your repayment plan, SoFi won’t. It may allow you to include your payment to it through your plan, but this is just for convenience and not a concession on interest.

3. Unlikely to sue

While credit card companies and banks may work with collection law firms and eventually sue you for delinquency, it’s not common with online lenders, which tend to be concerned with their reputation. “SoFi actually was suing for a time,” Bovee said, “but decided in 2018 they don’t want to be known that way so instead package debt and sell it to debt buyers.”

4. Doesn’t tend to settle

While Bovee has seen consumers negotiate good settlements on their SoFi loans, that typically happens after they are sold to debt buyers. Debt buyers generally buy accounts for far less than the face value of your loan balance  and may be motivated to settle because it doesn’t take much for them to turn a profit on your account.

5. Offers unemployment protection

If your challenges in keeping up with payments result from losing your job, and it was through no fault of your own, SoFi allows you to apply for a forbearance. This pause on paying your loan can be granted in three-month increments and for up to 12 months total for the life of the loan. It also offers free career coaching to members. 

If none of these options helps you resolve your debt, you can also consider bankruptcy. If you are approved for Chapter 7, all your unsecured debt, including your SoFi personal loan, will be discharged. 

Resolve recommends SoloSettle

Resolve partners with SoloSuit which provides a debt settlement tool called SoloSettle. If you are being sued for debt, you can use SoloSettle to get it settled quickly.