How Much Bigger Could SoFi's Lending Business Get? You Might Be Surprised

SoFi (NASDAQ: SOFI) recently reported its fourth-quarter earnings, and the growth in its lending business has been impressive. In the fourth quarter alone, the company produced loan originations of $10.5 billion -- its highest quarterly total ever.

While this sounds like a massive amount of loan volume (and it is), it could just be the beginning. In fact, SoFi's loan business remains a multi-trillion-dollar opportunity, and that's just in the three types of loans the fintech currently offers.

Three massive growth opportunities

SoFi currently offers three different types of loans -- personal loans, student loans, and home loans.

Image source: Getty Images.

Let's start with personal loans, which made up about 71% of the loans originated in the fourth quarter. While the personal loan market isn't enormous (about $100-$200 billion in size, depending on the source), CEO Anthony Noto believes the true opportunity is to help Americans get rid of high-interest debt, of which there is much more.

In the company's earnings call, Noto said, "The opportunity remains massive as the real addressable market is the nearly $1 trillion of prime revolving credit card debt, just sitting there, waiting to be refinanced at up to half the rate."

On student loans, SoFi's volume has more than doubled since 2023, as the COVID-era federal student loan payments pause ended. Most of SoFi's student loan volume comes from refinancing, and keep in mind that the volume has soared despite persistently high interest rates. Noto estimates that if interest rates were to drop by just 50 basis points, the $400 billion addressable market opportunity would increase by 25%. Plus, SoFi has been rolling out new private student loans to help current students bridge their funding gap.

Last but certainly not least are home loans. SoFi's home loan volume grew by 95% year-over-year in the fourth quarter to an annualized pace of about $4.5 billion. U.S. homebuyers obtain several trillion dollars in purchase mortgages in the typical year, and that's on top of the potential for home equity and refinancing loans, especially as interest rates fall.

Refinancing is a major opportunity, as Americans are sitting on the highest level of home equity ever, and SoFi sees significant potential to cross-sell refinancing loans to its existing membership base. As Noto said, "Within our own member base, about 90% of those that have home loans have them with other institutions. As rates come down and many of these members look to refinance, we'll be in a prime position to win that business."

More loans to come?

In addition to these three types of loans, there are other massive loan market opportunities that SoFi could tap into as it continues on its mission to become an all-in-one fintech platform. For example, SoFi plans to roll out business banking services in the near future, and several types of consumer loans (such as auto loans) aren't offered by the company yet.

The bottom line -- just because SoFi's loan business has grown rapidly in recent years doesn't mean it can't get much larger in the future.

Matt Frankel, CFP has positions in SoFi Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.