An article in the Wall Street Journal on fintech firm Social Finances Inc. (SoFi) noted that “SoFi’s main business of refinancing student loans is particularly sensitive to interest rates. Lacking its own base of deposits, the company borrows money at variable rates from banks to then lend to recent graduates.”

a. What does it mean to refinance a loan? In what circumstances would a borrower want to refinance a loan? 

b. What does the article mean by a “base of deposits”? What do conventional banks use their base of deposits for? 

c. What advantages might fintech firms like SoFi have over conventional banks that would allow them to succeed in making loans even though they lack a base of deposits?