PROPOSAL FOR A LOAN ELIGIBILITY CHECKING SYSTEM USING MACHINE LEARNING(ML)

DOMAIN OF INTEREST

Particularly focusing on lending institutions and their processes for determining loan eligibility, the
domain of interest for this proposal is centered around financial services industry such as banks, digital
payments, insurance, lenders, etc. A loan eligibility ML project that focuses on these sectors would
greatly expedite the loan approval process, increase accuracy, save operating costs, and ultimately
enhance lending institutions' business outcomes and customer experiences.

PROBLEM DEFINITION

Conventional loan approval procedures take a lot of time, are prone to mistakes made by people, and
might be swayed by opinions. The objective is to boost efficiency, decrease processing time, and
minimize mistakes by automating this process with machine learning techniques using historical loans
data. A user-friendly ML system that can be easily integrated into existing loan management systems
while ensuring that it adheres to legal and ethical guidelines is what is most needed for these financial
sectors.

WHY USE ML TO SOLVE THE PROBLEM

ML can significantly cut the time taken to process loan applications, from hours to minutes and machine
learning models can enhance the accuracy of credit risk assessments, allowing a more informed lending
decision and lowering default rates. By automating the eligibility check, customers receive immediate
feedback on their loan eligibility, which can save them time and stress associated with manual
processes. ML systems can also handle large volumes of data and requests. Overall, implementing a ML
loan eligibility system can lead to more efficient operations, improved customer satisfaction, and a
stronger competitive position in the lending market.

POSTULATED HYPOTHESIS

1. Total Income Hypothesis: A higher total income (i.e combined applicant Income and co-
applicant Income) increases the chances of a loan approval.
2. Loan Amount Hypothesis: Smaller loan amounts have a higher chances of loan approval
compared to larger ones, suggesting that smaller loans are considered less risky

AIM AND OBJECTIVES

The major objective of a ML loan eligibility checker is to automate and streamline the loan approval
process, ensuring that eligible loan applicants receive timely and accurate decisions. The ML system will
be able to process documents, verify data, investigate suspicious activity, address bias and unfairness
amongst other benefits

DATASET DESCRIPTION

The insurance industry is the one that uses analytics and data science techniques most of all industries.
There are 13 columns and 615 rows in the dataset. Consumers filled out an online application form,
entering information about their gender, marital status, education, number of dependents, income, loan
amount, credit history, and others. https://www.kaggle.com/datasets/ninzaami/loan-predication