After a few years of plunging loan volume and a lack of profitability, Upstart (UPST 3.14%) has done an excellent job of turning things around. The lending technology company is now in full growth mode once again, and management expects to exceed $1 billion in revenue in 2025 for the first time ever.
To be sure, Upstart's core personal loan business is impressive. The company continues to add bank partners and now plays a role in originating a double-digit percentage of U.S. personal loan volume. Plus, now that it's a more established company and has been through a bear market and economic turbulence, there is now some great data that indicates Upstart's methodology does indeed do a better job of predicting risk than the traditional FICO model alone.
Upstart's personal loan vertical certainly still has serious growth potential. That's apparent in the recent numbers. Plus, if interest rates fall over the next couple of years like most experts predict, it could cause overall personal loan volume to surge.
However, Upstart's personal loan business might not be the most exciting part of the company's future growth story. Its newer growth verticals, auto loans and home equity lines of credit (HELOCs), are small parts of the business now, but are growing rapidly and are much bigger opportunities. And one could be a potential 10x catalyst for this business.
Image source: Getty Images.
Upstart's sleeper growth vertical
First, both of Upstart's new verticals are gaining serious traction. Auto loan originations grew by 42% sequentially in the first quarter of 2025 and more than 5x compared to year-ago levels. And with a $677 billion market size and just $61 million in origination volume last quarter, this is a vertical with lots of growth potential.
HELOCs are the newer of the two verticals to Upstart's ecosystem and are seeing impressive traction already. The company originated $41 million in HELOC borrowing capacity in the first quarter, 52% sequential growth. And although this is the smallest of the three loan types today, it's the one I'm most excited to watch.
Here's why the HELOC vertical has so much potential. After a boom in cash-out refinancing and HELOCs in the 2020-2021 time frame, when mortgage rates were in the 3% range, popularity of tapping into one's home equity plunged, and has remained extremely low. In short, even if you have hundreds of thousands of dollars of equity in your home, it simply isn't as attractive to use it if you're paying 7%+ interest rates to do it.
Because relatively few homeowners have been tapping into their equity, and home prices have continued to rise, there's more home equity in the United States than every before. In fact, U.S. homeowners are currently sitting on about $35 trillion in home equity -- the highest level ever.
Of course, not all of this could be borrowed against, as most lenders only let borrowers take out equity up to 80% of their home's value. And even if interest rates fell to an absurdly low level like they did in 2021 (which isn't very likely), not every borrower will decide to take advantage.
Having said that, the median expectation priced into financial markets is for two full percentage points of Federal Reserve rate cuts by the end of 2026. This could definitely cause mortgage rates to move substantially lower and create a surge in HELOC volume that is in the trillions of dollars. If Upstart can even get a few percentage points of this flowing through its lending methodology, it could be a massive catalyst for the company's fee revenue.
It's still very early
In the most recent quarter, Upstart's auto and HELOC origination volume combined made up less than 1% of the company's total loan volume. But both are growing rapidly, and now that Upstart has shown the effectiveness of its lending methodology, it could help accelerate adoption of its newer verticals. And if mortgage rates trend lower over the next couple of years, HELOC volume could soar and even send the stock up 10 times in price.
