The Power of Home Equity Education

Credit unions have long been known for personalized services that help members make informed financial decisions. The numbers back up that claim—according to America’s Credit Union's June National Membership Benefits Report, credit unions have provided over $24 billion in direct financial benefits to its members in the last twelve months. Part of this success can be attributed to services around member education towards financial literacy. 

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Why Member Education on Home Equity Matters

Well-informed members make more valuable financial decisions for themselves. And when members realize more positive outcomes, they become more loyal to the credit union that educated them. That’s because strong education programs and positive outcomes position credit unions as trusted, valued partners. Not only will borrowers develop stronger loyalty, but they are more likely to use a broader range of financial products, which creates a more diversified portfolio and revenue streams for you.

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Amidst your member education and marketing programs is a widely untapped but primed area for your success: home equity loans. The amount of HELOC accounts has increased every quarter since mid-2023, and home equity rates are expected to drop later this year. Despite the opportunity for borrowers and lenders alike, not all borrowers are aware of the option of home equity loans. 

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Home Equity Education 101

First and foremost, credit unions must begin educating their borrowers on the opportunity of home equity, starting with the basics. I’ll admit—I didn’t know what a home equity loan was before joining Coviance, and neither did many of my colleagues. It’s likely many of your members don’t even know about this option either. Your home equity marketing programs must start with simply explaining to borrowers what home equity loans are, and their options for getting a home equity loan.

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Teach borrowers that home equity is a vehicle to achieving their financial goals by tapping into wealth they already own. Often, the average interest rate of a home equity loan is much  more favorable than a credit card. As of the time of writing this blog, the average rate range for a  home equity loan is 8.5-9.5%, and HELOC ranges from 8.6-10.9%. Compare that to the average credit card interest rate of 27-33%—it’s not hard to see the benefit of leveraging your home equity. 

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Once borrowers understand what home equity loans are, it’s important to explain to borrowers that there are a variety of use cases available to them. There’s a common misconception that these loans are used for home improvement or other work done on a home, such as renovations or additions. But in reality, a home equity loan can be used for anything, including:

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• Consolidating debt. For members that have several loans, from auto and home to education, consolidating debt into one easy spot through home equity loans can simplify financial work.
• Stabilizing high interest, unsecured debts. As previously mentioned, credit card interest is typically significantly higher than home equity interest rates and can frequently change month to month. Home equity loans stabilize and secure debts.
• Planning for major life events or changes. Family planning and life events can be sudden and unexpected, or planned and anticipated. In either case, homeowners can quickly and easily tap into their home equity for their financial outcomes.
• Recreational activities. While many borrowers may turn to their credit cards for more recreational or “fun” activities such as vacations or purchases, a home equity loan can accomplish these goals just as easily—and with less interest.

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These are just a few examples and ideas of what to teach borrowers. Regardless of your strategy, its important to remember to meet your borrowers where they are. Consumers have a multitude of options available for a loan. By educating and marketing home equity loans to your borrowers, you’re showing them what financial tools they have readily available to them—from a trusted, reliable financial leader.

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Drive Success in Your Home Equity Program

If you’re like most credit unions and community banks that Coviance works with, educating borrowers about home equity is only half the battle. The other half is the internal processes for home equity loans. Many companies we talk with describe their process as cumbersome, complex, and hard. Coviance automates, simplifies, and accelerates the home equity loan process, preparing you for success once your home equity volume starts to increase. Coviance helps in four areas:

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• Onboarding: Our dedicated team provides a smooth onboarding process, including system configuration and user training.
• Technical Support: Coviance offers technical support to address any issues your team may encounter while using the platform, and with a 99 percent satisfaction rating.
• Ongoing Training and Education: We provide ongoing training resources and educational webinars to keep your staff up-to-date on the latest platform features and best practices for home equity lending.
• Customer Success Management: A dedicated account manager acts as your primary point of contact for strategic support.

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If you’re ready to grow your home equity program with Coviance, contact your customer success manager or reach out to us at https://www.coviance.com/contact.