When a financial product offers yield, it’s important to understand how that yield is generated — and what risks come with it.
Democratized Prime is built to give more people access to institutional-grade lending markets through a clear, structured framework. The returns come from real lending activity in the broader economy, not from hidden mechanics or financial engineering. And like any lending product, that means there are risks to be aware of.
This overview is designed to help you make an informed decision with confidence.
First, what Democratized Prime is (and isn’t)
Democratized Prime gives you access to a lending marketplace. It’s important to understand how that differs from traditional deposit products.
Democratized Prime is:
A marketplace-based lending product
Yield-generating through credit exposure
Structured with defined risk management features
Democratized Prime isn’t:
A bank deposit
FDIC insured
SIPC insured
A guaranteed principal product
When you participate, your returns come from real lending activity. The yield you earn reflects compensation for taking on credit risk, rather than interest paid on a guaranteed deposit.
Because of that, this product doesn’t offer guaranteed principal protection. If your priority is preserving capital with no risk of loss, it may not be the right fit. But if you’re comfortable taking on measured credit risk in exchange for potential yield, keep reading to learn more.
Credit risk: How returns are generated
At a high level, Democratized Prime works by providing capital to a borrower (for example, Figure Lending LLC in the HELOC+ pool), which uses that capital to originate consumer loans.
The primary risk in this structure is credit risk: the possibility that some borrowers don’t meet repay their loans. If defaults were to rise significantly and stay that way, that could affect overall performance.
In that sense, returns are tied to the performance of the underlying loan pool, similar to:
Fixed-income investments
Structured credit products
Mortgage-backed securities
Credit-focused real estate vehicles
While no lending structure can eliminate risk entirely, Democratized Prime is designed with features intended to manage and mitigate risk exposure.
Performance in broader economic conditions
Credit markets don’t operate in a vacuum — they’re influenced by broader economic cycles.
During significant economic downturns, such as recessions or housing market declines, delinquency rates across lending markets may rise. This is often called correlated default risk, meaning multiple borrowers experience stress at the same time due to shared economic pressures.
The HELOC+ pool is primarily composed of loans to prime borrowers (generally 740+ credit scores, $200K+ income), who have historically demonstrated lower default rates than the broader market. That said, even highly qualified borrowers are not immune to economic cycles. You can assess the pools here.
In stressed environments:
Delinquencies may increase
Housing prices may fluctuate
Market interest rates may shift
Liquidity dynamics may evolve
Rates in the marketplace may adjust in response to changing supply, demand, and overall market conditions. While the structure is designed to be resilient across different environments, no financial product is completely insulated from severe macroeconomic events. Understanding that broader context is an important part of evaluating any yield-generating opportunity.
Structural features designed to mitigate risk
All lending involves some level of risk. But with that in mind, the HELOC+ pool has multiple structural safeguards in place to help manage and reduce risk where possible:
1. Prime borrower focus
The underlying loans are primarily made to borrowers with strong credit profiles, who have historically shown lower default rates.
For example, the HELOC pools contain Figure HELOCs, which are the same type of loans that have received AAA ratings from Moody’s and S&P — underscoring the credit quality and underwriting standards of those loans.
2. Defined advance rates for end borrowers
Borrowing against collateral is limited by advance rate requirements, which means the borrower can’t draw against 100% of collateral value. For example, Figure HELOCs generally allow homeowners to borrow up to 85% of their home’s value.
In practice, leverage in the HELOC+ pool is meaningfully lower: as of March 2026, the average loan-to-value is 62%. That means borrowers typically retain substantial equity in their homes, providing an additional cushion and margin of protection.
3. Collateral monitoring and adjustment mechanisms
If loan-to-value thresholds approach defined limits:
Additional collateral may be required, or
Collateral may be liquidated to reduce exposure
These mechanisms are designed to maintain defined coverage levels.
4. Pool Overcollateralization
The value of the collateral backing the pool is greater than the amount borrowed. Institutions must put more loans in than the value associated with the pool. That cushion is designed to help absorb potential losses first, providing an added layer of protection for lenders.
5. Removal of delinquent loans
If a loan becomes seriously delinquent (for example, 60+ days past due), the institutional borrower (for example, Figure in a Figure HELOC pool) is required to remove it from the pool. This helps maintain the overall performance of the collateral base and protects lenders from principal losses.
Together, these features are designed to help limit downside risk while still allowing participants to access the opportunity set within lending markets.
Liquidity structure
Democratized Prime uses an hourly liquidity mechanism, meaning participants can request to close out positions at the end of each hourly cycle under normal market conditions.
It’s important to distinguish structured liquidity from guaranteed redemption. While the mechanism provides regular access under normal conditions, it does not guarantee on-demand withdrawals in all market environments.
In typical conditions:
Positions may roll hour-to-hour
Participants may exit at each hourly cycle’s close
In stressed environments:
Auction dynamics may shift
Clearing rates may adjust
Execution timing may vary based on supply and demand
Rate dynamics
Interest rates are determined through a Dutch auction mechanism and are influenced by:
Borrower demand for capital
Lender supply of capital
Broader interest rate environments
Credit market conditions
Rates may move up or down over time. Yield is variable and market-driven rather than fixed, so returns may change as supply, demand, and broader credit dynamics evolve.
How to think about fit
Democratized Prime is best viewed as a credit-focused allocation within a diversified portfolio, not as a cash management or principal-protected product.
When deciding whether it aligns with your goals, it can help to consider:
Your tolerance for credit exposure
Your liquidity needs
Your time horizon
Your desire for yield relative to stability
Your overall portfolio allocation
Because yield and risk are inherently connected in credit markets, it’s important to evaluate both together. Democratized Prime is structured to provide transparent access to institutional lending opportunities, with features designed to help manage risk.
Ultimately, understanding both the opportunity and the safeguards built into the structure allows you to make a more informed, confident decision.
