Stock lending on Robinhood is safe from a custody standpoint, but it carries real risks you should understand before you opt in

Robinhood lends out shares you own to other traders who want to short-sell them. You receive a small payment in return. The shares themselves stay protected — Robinhood is a broker-dealer regulated by the SEC and FINRA, and your shares are held in your account. But stock lending does create risks that have nothing to do with whether Robinhood will lose your shares. Your shares can be called away during a short squeeze, you forfeit voting rights and dividends while they are lent, and the payment you receive is often very small.

The core question is not whether your shares are safe — they are — but whether the trade-off between the small payment you receive and the rights you give up makes sense for your situation.

Key Takeaways

  • Robinhood holds your shares in custody and cannot lend them without your permission, so the shares themselves are not at risk of being lost or seized.
  • When your shares are lent out, you do not receive dividends or voting rights, and you cannot sell them until they are returned — though Robinhood can force a return at any time.
  • A short squeeze can force your shares to be recalled, meaning you lose the ability to lend them and the income stops, sometimes suddenly.
  • The lending payment is typically very small — often less than 0.5% per year — and Robinhood keeps a portion of the fee before paying you.
  • You can turn stock lending off in your account settings at any time, and Robinhood will stop lending your shares when ready.

How Robinhood stock lending actually works

When you turn on stock lending in your Robinhood account, you give Robinhood permission to lend your shares to other traders. Robinhood finds a borrower — usually someone who wants to short-sell the stock — and the borrower pays a fee to borrow your shares for a set period. That fee is split between Robinhood and you.

Your shares never leave your account. You still own them, and Robinhood still holds them in your name. The borrower receives a temporary right to use those shares, but ownership stays with you. When the borrower returns the shares (or when Robinhood calls them back), the loan ends and your shares are yours to trade again.

The process is automatic once you opt in. You do not have to do anything for each individual loan. Robinhood handles the matching and the mechanics behind the scenes. You can see which of your holdings are currently lent in your account, and you can exclude specific stocks from lending even if the feature is turned on overall.

What happens to your dividends and voting rights

While your shares are lent out, you do not receive dividends. If a company pays a dividend and your shares are currently on loan, the borrower receives the dividend instead. You also cannot vote your shares at shareholder meetings while they are lent.

This matters most if you own shares in dividend-paying stocks. A stock that pays 3% annually in dividends becomes a 0% yield for you while it is lent out — and the lending payment you receive is usually much smaller than the dividend you miss. For dividend stocks, stock lending often costs you money in the long run.

You regain dividend and voting rights the moment your shares are returned, whether that happens because the borrower returned them or because Robinhood recalled them. If you own dividend stocks, you may want to exclude them from lending or turn the feature off entirely.

The risk of forced recall during a short squeeze

A short squeeze happens when a stock price rises sharply and short-sellers rush to buy shares to close their positions. When this happens, the demand for borrowed shares spikes, and lenders (including Robinhood) can force borrowers to return shares when ready. Robinhood then recalls your shares from the borrower and returns them to your account.

This is not a loss — you still own the shares, and they are returned to you. But it means the lending income stops abruptly. You cannot predict when a recall will happen, so you cannot count on the lending payment as steady income. If you were relying on that payment to cover something, a recall leaves you without it.

A recall also means you regain the ability to sell your shares, which you could not do while they were lent. Some traders see this as a benefit — you get your shares back and can act on price movements. Others see it as a disruption to their lending strategy. Either way, the income is not may provide to continue.

How much money you actually receive

The lending payment depends on demand for the stock. Stocks that are heavily shorted or hard to borrow pay higher rates. Stocks that are straightforward to borrow pay almost nothing — sometimes 0.01% per year or less.

Robinhood does not publish its fee split, so you do not know what percentage of the borrowing fee you receive versus what Robinhood keeps. Industry practice is typically 70% to the lender and 30% to the broker, but Robinhood's terms may differ. You can see the rate you are receiving in your account, but you cannot negotiate it.

For most stocks, the payment is small enough that it does not meaningfully offset the risk of losing dividends or the disruption of a recall. On a $10,000 position in a stock with a 0.5% lending rate, you would earn roughly $50 per year before Robinhood's cut — so perhaps $35 to you. If that stock pays a 2% dividend, you are giving up $200 per year to earn $35.

What you cannot do while shares are lent

While your shares are on loan, you can still see them in your account and you still own them. But you cannot sell them. If you try to sell, Robinhood will attempt to recall the shares from the borrower first. If the recall succeeds quickly, your sale goes through. If it takes time, your sale is delayed.

In practice, recalls usually happen within minutes or hours. But there is no may provide. If you need to sell urgently and your shares are lent, you may face a delay. This is rare but possible, especially during volatile market conditions when many recalls are happening at once.

You also cannot use lent shares as collateral for margin borrowing. If you use margin on Robinhood, lent shares do not count toward your buying power. This can reduce the amount you can borrow if a significant portion of your holdings are lent out.

How to turn stock lending on or off

Stock lending is opt-in on Robinhood. You must turn it on deliberately in your account settings. It is not automatic.

To enable it, go to your Account menu, select Settings, then find the Stock Lending section. Toggle it on and confirm. Robinhood will then begin lending shares that are may be able to access (most stocks are, but some are restricted).

To turn it off, follow the same path and toggle it off. Robinhood will stop lending your shares when ready, though shares already on loan will be returned to you over the next few days as borrowers return them or Robinhood recalls them.

You can also exclude specific stocks from lending. In your holdings, you can mark individual positions as "do not lend" even if stock lending is turned on overall. This lets you keep the feature active for stocks where it makes sense while protecting dividend payers or stocks you may want to sell soon.

Frequently Asked Questions

Can Robinhood lose my shares if they lend them out?

No. Robinhood is a regulated broker-dealer and must keep your shares in custody. Even if a borrower defaults or goes bankrupt, your shares are protected. The SEC and FINRA require brokers to maintain separate accounts for customer securities, so your shares cannot be seized to pay Robinhood's debts or a borrower's debts.

Do I have to pay taxes on stock lending income?

Yes. The lending payment is ordinary income and must be reported on your tax return. Robinhood will report it to the IRS on a Form 1099-INT or similar document at the end of the year. Keep records of all payments you receive.

What happens if I sell a stock that is currently lent out?

Robinhood will attempt to recall the shares from the borrower so you can complete the sale. In most cases this happens within minutes. If the recall is delayed, your sale order will be delayed too. You cannot sell shares that are actively lent without first recalling them.

Can I lend shares in a retirement account like an IRA?

Robinhood does not offer stock lending on IRAs or other retirement accounts. Stock lending is only available on standard taxable brokerage accounts. This is true across most brokers, not just Robinhood.

Is the lending payment worth it for dividend stocks?

Usually not. If a stock pays a 2% or higher dividend, the lending payment (often 0.1% to 0.5%) does not make up for the dividend you forfeit. The math works only for stocks with very low or no dividends, and even then the payment is usually small.