Journal of Engineering Sciences Vol 13 Issue 11,2022

LOAN PREDICTION DATASET USING MACHINE LEARNING WITH

DATA ANALYSIS
J. Suresh1, N. Sai Akhil2, P. Vinitha2, T. Jyothsna2, P. Bhargav Naidu2, S. Raja Shekar Reddy2
1
Assistant Professor, 2UG Student, 1,2Department of Information Technology
1,2
Malla Reddy Engineering College and Management Sciences, Medchal, Telangana
ABSTRACT
With the enhancement in the banking sector lots of people are applying for bank loans but the
bank has its limited assets which it must grant to limited people only, so finding out to whom
the loan can be granted which will be a safer option for the bank is a typical process. So, in
this project we try to reduce this risk factor behind selecting the safe person to save lots of
bank efforts and assets. This is done by mining the Big Data of the previous records of the
people to whom the loan was granted before and based on these records/experiences the
machine was trained using the machine learning model which give the most accurate result.
The main objective of this paper is to predict whether assigning the loan to person will be
safe or not. This work is divided into four sections such as data collection, comparison of
machine learning models on collected data, training of system on most promising model, and
testing.
Loan Prediction is very helpful for employee of banks as well as for the applicant also. The
aim of this Paper is to provide quick, immediate, and easy way to choose the deserving
applicants. It can provide special advantages to the bank. The loan prediction system can
automatically calculate the weight of each features taking part in loan processing and on new
test data same features are processed with respect to their associated weight. A time limit can
be set for the applicant to check whether his/her loan can be sanctioned or not. Loan
prediction system allows jumping to specific application so that it can be check on priority
basis. This project is exclusively for the managing authority of Bank/finance Company,
whole process of prediction is done privately no stakeholders would be able to alter the
processing. Result against particular Loan Id can be send to various departments of banks so
that they can take appropriate action on application. This helps all others department to
carried out other formalities.
Keywords: Loan prediction, machine learning, data analysis.
1. INTRODUCTION
As the data are increasing daily due to digitization in the banking sector, people want to apply
for loans through the internet. Artificial intelligence (AI), as a typical method for information
investigation, has gotten more consideration increasingly. Individuals of various businesses
are utilizing AI calculations to take care of the issues dependent on their industry
information. Banks are facing a significant problem in the approval of the loan. Daily there
are so many applications that are challenging to manage by the bank employees, and the
chances of some mistakes are high. Most banks earn profit from the loan, but it is risky to
choose deserving customers from the number of applications. One mistake can make a
massive loss to a bank. Loan distribution is the primary business of almost every bank. This

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project aims to provide a loan [1, 8] to a deserving applicant out of all applicants. An efficient
and non-biased system that reduces the bank’s time employs checking every applicant on a
priority basis. The bank authorities complete all other customer’s other formalities on time,
which positively impacts the customers. The best part is that it is efficient for both banks and
applicants.
As the data are increasing daily due to digitization in the banking sector, people want to apply
for loans through the internet. Artificial intelligence (AI), as a typical method for information
investigation, has gotten more consideration increasingly. Individuals of various businesses
are utilizing AI calculations to take care of the issues dependent on their industry
information. Banks are facing a significant problem in the approval of the loan. Daily there
are so many applications that are challenging to manage by the bank employees, and the
chances of some mistakes are high. Most banks earn profit from the loan, but it is risky to
choose deserving customers from the number of applications. One mistake can make a
massive loss to a bank.
Loan distribution is the primary business of almost every bank. This project aims to provide a
loan [1, 2] to a deserving applicant out of all applicants. An efficient and non-biased system
that reduces the bank’s time employs checking every applicant on a priority basis. The bank
authorities complete all other customer’s other formalities on time, which positively impacts
the customers. The best part is that it is efficient for both banks and applicants. This system
allows jumping on applications that deserve to be approved on a priority basis.
2. LITERATURE SURVEY
Sheikh et al. studied a very important approach in predictive analytics is used to study the
problem of predicting loan defaulters: The Logistic regression model. The data is collected
from the Kaggle for studying and prediction. Logistic Regression models have been
performed and the different measures of performances are computed. The models are
compared since the performance measures such as sensitivity and specificity.
Tumuluru et al. used the Machine Learning (ML) algorithms to extract patterns from a
common loan-approved dataset and retrieve patterns in forecasting future loan defaulters.
Customers’ past data, such as their age, income, loan amount, and tenure of work, will be
used to conduct the analysis. To determine the maximum relevant features, i.e., the factors
that have the most impact on the prediction outcome, various ML algorithms such as Random
Forest, Support Vector Machine, K-Nearest Neighbor and Logistic Regression, were used.
These mentioned algorithms are evaluated with the standard metrics and compared with each
other. The random forest algorithm achieves better accuracy.
Lohani et al. aimed to minimize the credit risks of defaulting. This study has applied logistic
regression as a tool to predict whether an applicant is eligible for the loan or not. The data is
collected from the Kaggle for studying and prediction.
Shaheen et al. applied on different machine learning techniques on customer's loans dataset
obtained from a public bank's database that contains customer's loans and personal data. The
data is processed and analyzed using Apache Spark, a machine learning tool for big data
processing. The result of the proposed system is evaluated by seven performance metrics to

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compare the performance of each classifier and find out the best performing one among them.
It is found out that the ensemble machine learning techniques has better performance than
single base classifiers in predicting the loan default.
Sharma et al. studied the learning techniques as well as the raw datasets utilized for training
and test sets. The system model’s precision is also discussed. This work also provides a quick
overview of a few datasets that can be used to anticipate loan/mortgage analysis. Recent and
future trends are also spotlighted.
Gupta et al. used a machine learning technique that will predict the person who is reliable for
a loan, based on the previous record of the person whom the loan amount is accredited
before. This work's primary objective is to predict whether the loan approval to a specific
individual is safe or not.
Maheswari et al. used statistical measures to preprocess the data and build an effective model
that will predicts the loan defaulter accurately.
Lai et al. demonstrated that the AdaBoost model can achieve a 100% accuracy for predicting
loan default, outperforming other models including XGBoost, random forest, k nearest
neighbors, and multilayer perceptrons. This result showed the promising application of
machine learning techniques in the financial industry.
Ereiz et al. demonstrated the prediction using machine learning models is very high but
depends on the quality of the data. Several algorithms (to be more specific - BigML's
OptiML) were used to identify the best suited for the lending business.
Kumar et al. reduced the risking factor of banks behind finding the appropriate person for
loan approval by the bank. This work even reduced the time of loan approval analysis. This
work first used data mining techniques to analyze previous records to which the bank has
already sanctioned loan based on the analysis made out of these records this work train the
deep learning model. The new data is treated as testing data, and the output of the customer is
calculated accordingly.
3. PROPOSED SYSTEM
Fig. 1 shows the proposed block diagram of loan description.

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Fig. 1: Block diagram of proposed system.

3.1 Dataset Description

13-Columns: Loan_ID, Gender, Married, Dependents, Education, Self_Employed,
ApplicantIncome, CoapplicantIncome, LoanAmount, Loan_Amount_Term, Credit_History,
Property_Area, Loan_Status,
615-Rows
3.2 Support Vector Machine Algorithm (SVM)
Support Vector Machine or SVM is one of the most popular Supervised Learning algorithms,
which is used for Classification as well as Regression problems. However, primarily, it is
used for Classification problems in Machine Learning. The goal of the SVM algorithm is to
create the best line or decision boundary that can segregate n-dimensional space into classes
so that we can easily put the new data point in the correct category in the future. This best
decision boundary is called a hyperplane.
SVM chooses the extreme points/vectors that help in creating the hyperplane. These extreme
cases are called as support vectors, and hence algorithm is termed as Support Vector
Machine. Consider the below diagram in which there are two different categories that are
classified using a decision boundary or hyperplane:

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Applications
 Face recognition
 Weather prediction
 Medical diagnosis
 Spam detection
 Age/gender identification
 Language identification
 Sentimental analysis
 Authorship identification
 News classification

3.3 Advantages of proposed system

 SVM works relatively well when there is a clear margin of separation between
classes.
 SVM is more effective in high dimensional spaces.
 SVM is effective in cases where the number of dimensions is greater than the number
of samples.
 SVM is relatively memory efficient.
4. RESULTS AND DESCRIPTION
Module Description
 Bank Dataset
 Data analysis and Splitting
 Train data
 Test data
 SVM Training
 Trained features
 SVM Testing

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 System performance estimation

 Loan status
Sample dataset

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5. CONCLUSION AND FUTURE SCOPE

Conclusion
This application can help banks in anticipating the fate of credit and its status and relies upon
that they can make a move in introductory long periods of advance. Utilizing this application
banks can diminish the quantity of awful advances from bringing about cut off misfortunes.
A few AI calculations and bundles were utilized to set up the information and to fabricate the
arrangement model. AI bundle libraries help in fruitful information examination and highlight
determination. Utilizing this technique bank can without much of a stretch distinguish the
necessary data from immense measure of informational collections and aides in fruitful
advance forecast to diminish the quantity of awful credit issues. Information mining
strategies are helpful to the financial part for better focusing on and procuring new clients,
most significant client maintenance, programmed credit endorsement, which is utilized for
extortion avoidance, misrepresentation identification progressively, giving section-based
item, investigation of the client, exchange designs after some time for better maintenance and
relationship, hazard the executives and showcasing.
REFERENCES
[1] Kumar Arun, Garg Ishan, Kaur Sanmeer, Loan Approval Prediction based on Machine
Learning Approach.
[2] Vishnu Vardhan case study of bank loan prediction, https://medium.
com/@vishnumbaprof/case-study-loan-prediction-ac035f3ec9e4.
[3] M. A. Sheikh, A. K. Goel and T. Kumar, "An Approach for Prediction of Loan Approval
using Machine Learning Algorithm," 2020 International Conference on Electronics and
Sustainable Communication Systems (ICESC), 2020, pp. 490-494, doi:
10.1109/ICESC48915.2020.9155614.
[4] P. Tumuluru, L. R. Burra, M. Loukya, S. Bhavana, H. M. H. CSaiBaba and N. Sunanda,
"Comparative Analysis of Customer Loan Approval Prediction using Machine Learning
Algorithms," 2022 Second International Conference on Artificial Intelligence and Smart
Energy (ICAIS), 2022, pp. 349-353, doi: 10.1109/ICAIS53314.2022.9742800.
[5] B. P. Lohani, M. Trivedi, R. J. Singh, V. Bibhu, S. Ranjan and P. K. Kushwaha, "Machine
Learning Based Model for Prediction of Loan Approval," 2022 3rd International
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[6] S. K. Shaheen and E. ElFakharany, "Predictive analytics for loan default in banking sector
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10.1109/ICCTA45985.2018.9499147.
[7] Sharma, A., Kumar, V. (2023). An Exploratory Study-Based Analysis on Loan Prediction.
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[8] A. Gupta, V. Pant, S. Kumar and P. K. Bansal, "Bank Loan Prediction System using
Machine Learning," 2020 9th International Conference System Modeling and

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Advancement in Research Trends (SMART), 2020, pp. 423-426, doi:

10.1109/SMART50582.2020.9336801.
[9] P. Maheswari and C. V. Narayana, "Predictions of Loan Defaulter - A Data Science
Perspective," 2020 5th International Conference on Computing, Communication and
Security (ICCCS), 2020, pp. 1-4, doi: 10.1109/ICCCS49678.2020.9277458.
[10] L. Lai, "Loan Default Prediction with Machine Learning Techniques," 2020
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[11] Z. Ereiz, "Predicting Default Loans Using Machine Learning (OptiML)," 2019 27th
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[12] Kumar, A., Dugyala, R., Bhattacharya, P. (2021). Prediction of Loan Scoring
Strategies Using Deep Learning Algorithm for Banking System. In: Singh, P.K.,
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