CommonBond: A Poor Man's SoFi or Its Own Unique Animal?

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CommonBond: A Poor Man's SoFi or Its Own Unique Animal?

Nov, 2nd 2016

CommonBond is another large-scale online lender whose main focus is refinancing student loans. On the outside, CommonBond looks pretty similar to SoFi with a target audience, according to Tech Crunch of "higher education students, who will be earning more over the years when they are working." There are some differences between SoFi and CommonBond worth noting, however.

For instance, according to bestcompany.com, CommonBond allows cosigners, has fixed and variable rate loans and even helps you find a job if you lose your current one. The key difference between CommonBond and SoFi is in their income level requirements for borrowers. While SoFi lends money to people with average incomes of $142,000 per year, CommonBond seems to accept lower income levels. Comments written by CommonBond users on two different websites reveal applicants being told there is an $80,000 per year income requirement for getting a CommonBond loan.

One of the comments is from 2015 and another one from 2016. Some of these comments, quoted below, were not ringing endorsements:

"CommonBond was ridiculous. They told me I needed a cosigner on a $9500 refinance due to insufficient income. I make 75k/year! They said the minimum is 80k. Really??"

"Common Bond is still insane and requiring an income of 80k before I can refinance an $8500 without a cosigner. Ridiculous."

Not everybody with an income of more than $80K will get a loan either, judging from some of the comments, for example:

"I have about $220K at 10.5% interest. I was preapproved through CommonBond at a 6.5% rate. I make $92K a year and credit score is 752. It told me I need a consigner. Added a consigner with a credit score of 657 and income of $200K. They DENIED the loan. Said my credit score was "below the threshold" and both of our incomes are too low. This is a joke."

And when the income is $60,000 per year, the negative sparks fly:

"I have perfect credit and I make 60k a year and they gave me a 5.55% rate fixed. It's ridiculous. Then they'll tell you that you have to make "minimum salary requirements." It's a scam. They asked for a cosigner. I can finance a 40k car but can't refinance 10k? Oh okay."

And complaints about the less than timely nature of their customer outreach:

"Not a fan of CommonBond. It took them 2 to 3 weeks to finally tell me that my wife wasnt qualified as a co-signer even though she makes $50k per year working part time. My wife and I had a good laugh about that one."

Based on these comments, CommonBond, like SoFi, focuses on the HENRY customer (High Earning, Not Rich Yet), except with a lower minimum income level.

So, Is CommonBond a poor man's SoFi? 

CommonBond seems to allow a “lower” income entry level to get a loan, even if it still seems pretty high considering that the median household income for the United States in 2015 was $55,775. What kind of interest rates can you get from CommonBond for a student loan refinance? As you might expect the APR you get for an approved loan depends on a variety of factors. One comment claims in 2014 and 2015 his CommonBond interest rates were actually higher than the rates for a regular federal loan.

"CommonBonds primary value proposition is their rates  supposedly lower than federal loan rates by a material amount. This is NOT the case for me, and Im not sure this is the case for many folks. My CommonBond rates turned out to be higher than my federal rates: 6.74% (CommonBond 2014) vs. 6.21% (federal 2014); and 5.95% (CommonBond 2015) vs. 5.84% (federal 2015). This was both a surprise and a disappointment."

Another comment claims a CommonBond save him about $20,000 for an MBA loan, although no details on income level were given.

How exactly does CommonBond decide who to approve for a loan? It is difficult to say. CommonBond has proprietary algorithms that calculate creditworthiness (their own version of a FICO Score). Some complaints are about the amount of red tape people have to go through with CommonBond only to find out later they adjusted the sought-after interest rate upward.

"Refinancing a ParentPlus loan and the application process was unbelievable. Over 3 weeks after being approved still asking for more and more documentation (every 5 days or so)  submitted 2 years W2s, 3 pay stubs, proof of graduation, Loan documentation, updated documents because CommonBond went into another month for approval. Also, raised the interest rate 2 points after being approved."

That isn't unique to CommonBond as many SoFi complaints are similar with the added annoyance of having the application denied for a variety of reasons.

A similarity between CommonBond and SoFi is that both fund their loans by selling them to investors. They look to guarantee investor ROI by finding debtors that are the least likely to default. Again, the main tangible difference here, aside from the use of cosigners, is the fact that CommonBond will lend money to people with much less than $142,000 of yearly income. By CommonBond's income eligibility standards, "lower" means $80,000 per year which while being less than SoFi’s minimum requirement, is still pretty high for many college graduates and most U.S. households.

Another difference is that CommonBond offers fixed and variable interests loans and they offer a loan that is a mixture of fixed and variable interests. This 10-year loan, called a "hybrid loan", gives the borrower an initial 5-year period with a fix interest rate, but the other 5 years have a variable rate that's impossible to predict.

If you are thinking about refinancing your student loan from an online lender and you don't know where to apply between SoFi and CommonBond, know that they're pretty much the same with CommonBond’s income requirements being slightly less strict with an ability to use a cosigner while offering more loan options.

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