Lending Club Raises Minimum Deposit Amount for New Investors

The micro retail investor can no longer experiment with peer-to-peer lending through just a handful of loans, according to a recent announcement made by Lending Club. Going forward, new users must deposit at least $1,000 to get started. Those investors can still allocate $25 per loan, however. The reason for the deposit increase? Forced diversification.

A Lending Club blog post explained that “data shows that Lending Club investors who are able to diversify their accounts have generally experienced less volatility than investors with more concentrated holdings. This is in part because investors are able to purchase multiple Notes, reducing their exposure to any single Note.” 98% of accounts with more than 100 notes have experienced positive returns, they claim.

On the LendAcademy blog, Peter Renton advocated for an even higher minimum, $2,500, so that investors could at least start off with 100 notes.

It’s an acknowledgment that the type of investing actually carries the risk of loss and is not actually for everyone. I would not be surprised if they eventually set a minimum deposit amount of $10,000 or simply phased out retail investors altogether in favor of accredited ones at a minimum instead. Time will tell.

Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.