SoFi Prepayment Penalty (Can You Avoid It)

LAST UPDATED: April 11, 2023 | By Conrad Golly
SoFi Prepayment Penalty (Can You Avoid It)

SoFi not only offers a fantastic checking and savings account but has also been a growing lender in the finance industry.

SoFi loans are quick and easy and can be paid back at any time in full.

I wondered if you incur a prepayment penalty when paying back your loan early to SoFi.

After some research here’s the answer I found:

There is no kind of SoFi prepayment penalty. You can pay off a loan partially or in full at any time without incurring extra fees or penalties. Paying off a loan partially will not alter your regular payment schedule.

In this post, we’ll cover everything related to SoFi and prepayment penalties.

I’ll briefly go over how prepayment penalties and why SoFi has chosen not to charge any such penalties.

We’ll also look at whether you can pay off a SoFi loan early and how to go about doing that.

How do prepayment penalties work?

SoFi Prepayment Penalty (Can You Avoid It)

When taking out a loan the lender earns interest for lending out money. This interest can be defined as the value of time or the value of money over time.

Essentially, the interest represents the opportunity cost that the lender incurs when noting making use of the money otherwise.

When a loan is paid back in full earlier than agreed upon in the contract, the interest payments to the lender stop.

In short, the lender earns less being paid back early than if the loan had been kept outstanding longer.

Let’s look at a simple example of a $100,000 loan with a 10% interest rate:

YearInterest Earned

As you can easily see, the longer the loan is outstanding and interest payments are made, the more the lender earns.

When the loan is paid back early, prepayment penalties are meant to compensate the lender for the loss of interest income.

Prepayment penalties work differently for various types of loans:

  • Personal Loans: When taking out a personal loan the existence of a prepayment penalty solely depends on the contractual obligations of the two parties involved. Many private lenders have prepayment penalty clauses in their contracts but there are also those who do not – such as SoFi.
  • Student Loans: When it comes to student loans it is generally unlawful to charge a prepayment penalty. This is the case whether you take out a private or federal student loan. Student loans can be paid back at any time partially or in full without incurring a penalty.
  • Mortgages: With mortgages, prepayment penalties are also more common although many banks offer certain time windows where an early repayment of the mortgage can be done without any extra costs.

But let’s look at SoFi specifically and the reasons behind their no-prepayment-penalties policy!

Why SoFi does not have any prepayment penalties

SoFi has positioned itself as one of the simplest and most convenient banking companies on the market.

And simply put: SoFi early payoff penalty does not fit into the image of a customer-friendly easy-to-use banking app.

Furthermore, incurring a prepayment penalty may make customers more hesitant to take out another loan in the future and since SoFi’s main goal is to bind customers to their services over the long term, prepayment penalties simply don’t make any sense.

Another reason for the existence of these penalties is that it used to be much more costly for the lender to conduct background checks on credit worthiness and to manage the loan transactions.

With the advent of financial technology, this process has become incredibly simple and automated.

Thus, it makes more sense for SoFi simply to issue another loan to someone else to make up for the lost interest on another loan than to charge a penalty.

Can you pay off a SoFi loan early?

Yes, you can pay off a SoFi loan at any time simply by logging into your account at and making a payment to your loan balance. You will not incur a prepayment penalty.

To pay off your SoFi loan early follow these steps:

  1. Log in to your account at or open the SoFi app
  2. Go to your loan overview
  3. Click on ‘Make a 1-time payment’
  4. Select ‘payoff’ as the payment type
  5. Enter the date you would like your payment to post

That’s it! You have now successfully paid back a SoFi loan early without any penalties or fees. In todays world, this is how simple banking should be.

Note that if you pay back a partial amount of the loan (which is also possible with SoFi) your regular payment schedule will not change. You can keep making payments as usual until the loan is paid off in full.

Want to know what a SoFi stock warrant is? I wrote a great article on SoFi warrants.

The Verdict: Does SoFi Have Prepayment Penalties?

SoFi does not charge any prepayment penalties or other fees and loan can be paid back any time partially or in full.

SoFi loans can be paid back from your member dashboard and paying a SoFi loan early won’t affect your credit score.

Conrad Golly

Conrad Golly

I’m Conrad, a retired first responder turned successful Tyapreneur with a passion for real estate, family, and business acquisitions. With a focus on growing online ventures, I bring a wealth of experience to the world of entrepreneurship. I write on investing, personal finance, family life, and business strategies, inspiring others to achieve their goals.

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