A New Prediction Approach for Preventing Default Customers from Applying Personal Loans Using Machine Learning

Abstract

In the Egyptian banking industry, loan officers use pure judgment to make personal loan approval decisions. In this paper, we develop a new predictive method for default customers' loans using machine learning. The new predictive method uses the available personal data and historical credit data to evaluate the credit trust-worthiness of customers to obtain loans. We used the ABE dataset for training and testing, as we used 10 features from the application form and i- score report class that could give great help to credit officers for taking the right decision through avoiding customer selection using random techniques. The collected dataset was analysed by using various machine learning classifiers based on important selected features, to obtain high accuracy. We compared the performance of several machine learning classifiers before and after feature selection. We have found that in terms of high accuracy, the most important features are (activity – income – loan) and in terms of better performance the decision tree classifier has surpassed any other machine learning classifier with significant prediction accuracy of almost 94.85%.