Agreed on the need for diversification. But some platforms need a minimum of about $20k per loan. How to do diversification in this case if we don't have a large capital to invest in?

I can only simply say, use other platform.
I would recommend you to look into other p2p platform. There are platforms which has a low investment amount. Funding societies and moolah sense need you to deposit a minimum deposit of $500. Each loan is $20 which can spread your risk to 25 loans. This is sufficient to cover 2 defaults worth of $20

Minterest needs a minimum deposit of $1000. Each loans are at least $50-100 if I call correctly.

Need referral for funding societies or advice. Feel free to fb msg or comment