How Do HELOCs Utilize Blockchain?

A blockchain is a digital ledger—a database that can store records, prove ownership, and share information. Unlike other databases, a blockchain is decentralized, meaning no one person controls it. This makes it a safer, more trustworthy option to record transactions.

Many financial companies, including certain HELOC lenders, combine blockchain technology with artificial intelligence (AI) to create more efficient application, underwriting, and funding processes that benefit the lender and the borrower. 

In this review:

• How does blockchain benefit HELOC borrowers?
• How does blockchain benefit HELOC lenders?
• Are there downsides to using blockchain for HELOCs?
• What lenders use blockchain for HELOCs?
• How important should a HELOC lender’s use of blockchain be to me?

How does blockchain benefit HELOC borrowers?

What is a blockchain HELOC? It’s a home equity line of credit that uses blockchain technology to store and transmit records of the transaction, verify paperwork, exchange data, and more. 

These types of HELOCs can benefit borrowers in several ways. 

More affordable

Blockchain can make loans more affordable. According to HELOC lender Figure, using blockchain to power the lending process brings origination costs down from thousands of dollars to just hundreds. 

Faster funding

Blockchain also streamlines much of the underwriting process, allowing for faster funding. Synergy One Lending, for example, uses blockchain to speed its funding time up to just five days. Using traditional manual processes, you can expect HELOC funding to take 45 days or more.

Easier and more secure

Blockchain can also make lending more secure because it’s encrypted and can’t be altered. It enables a fully online process, meaning an easier and hassle-free experience—no matter where you’re located.

How does blockchain benefit HELOC lenders?

For lenders, blockchain technology can streamline application processing, increase underwriting efficiency, and eliminate the need for many third-party services—and the costs that come with them. 

Mike Cagney, CEO of Figure, told PYMNTS blockchain reduces its lender-side costs so much (from thousands of dollars to “low hundreds”), it makes HELOCs more attractive to originate. 

Blockchain reduces risk since records are unalterable. It also lowers the chance of costly, time-consuming mistakes thanks to its digitization of previously manual tasks.

Are there downsides to using blockchain for HELOCs?

Only a handful of lenders use blockchain to power their HELOC processes, but it isn’t because of downsides to borrowers. 

The technology is still fairly new and unfamiliar, so lenders may be waiting for the industry to embrace it before making the investment. Digital bank BBVA advises blockchain has high implementation costs. 

Lenders may also have concerns about digitizing payments or using digital currencies. 

What lenders use blockchain for HELOCs?

Our research found three lenders that offer blockchain-powered HELOCs: Figure, Synergy One Lending, and Caliber Home Loans. Find out more about each below.

Figure

One of the first lenders to integrate blockchain in its HELOC processes, Figure has used the technology to increase efficiency by 133 basis points (1.33%)—better than the 90-basis-point improvement it was targeting. 

Blockchain has also allowed Figure to speed up the funding process from weeks to just days. 

Check out our Figure HELOC review.

Synergy One Lending

Synergy One Lending also offers blockchain HELOCs. Since launching the product in mid-2021, it’s used the combination of blockchain and AI to speed up its preapproval time to just four minutes and its funding time to five days in many cases.

Caliber Home Loans

Caliber Home Loans licensed Figure’s Provenance platform to provide its own blockchain-powered HELOC. 

It uses Provenance to enable a faster, more efficient digital lending process while reducing costs and risk. Caliber plans to integrate blockchain technology into its other lending programs.

How important should a HELOC lender’s use of blockchain be in my decision-making?

If you want fast funding and an easier application process, a blockchain HELOC lender could be a smart move. 

However, if you’d prefer a more hands-on or in-person process, you may prefer to contact a brick-and-mortar bank or credit union in your area.

If you’re unsure which route to take, compare both options, or talk to a mortgage professional. They can help you make the right choice for your goals.

For more about HELOCs, check out our resource: “What Is a Home Equity Line of Credit?”