Enhancing Loan Prediction Accuracy: A Comparative Analysis of Machine Learning Algorithms with XAI Integration

Abstract

The contemporary financial landscape necessitates loan recommendation systems that offer both accuracy and transparency. Conventional assessment methodologies often suffer from limitations in efficiency and transparency, leading to potential risks for both lenders and borrowers. This research proposes the development of a novel loan recommendation system that leverages the power of machine learning (ML) and Explainable Artificial Intelligence (XAI). The paper delves into the processes of data collection, preprocessing, model training, evaluation, and subsequent integration into a web application using the Flask framework. The employed datasets encompass a variety of loan types, with the study aiming to identify the most effective ML algorithms from a selection that includes XGBoost, CatBoost, Random Forest, Gradient Boosting, and Logistic Regression. To enhance the system's transparency, Explainable AI methods, such as LIME, are incorporated. The culmination of this research is a web application that facilitates personalized predictions regarding loan eligibility, accompanied by clear explanations. Index terms - Loan Recommendation System, Machine Learning, Explainable AI, XGBoost, CatBoost, Random Forest, Gradient Boost, Logistic Regression,LIME.