Abstract
Loans are important products of financial institutions and banks. All institutions are trying to find effective business strategies to convince more customers to apply for a loan. However, some customers are unable to repay the loan after their application is approved. Therefore, many financial institutions and banks have considered some events when approving a loan. Determining whether a borrower can repay a loan is difficult. If the Financial institution, the Bank is too strict, there will be fewer approved loans, which means less profit. But if the approval is too loose, they will approve loans that default. The Machine learning classification algorithms are applied to predict loan default: Logistic Regression, Decision Tree, and Artificial Neural Networks. Accuracy, precision, recall, and ROC curve are used to evaluate the models and the results compared. We use feature selection techniques and propose models of Ensemble learning that are Logistic Regression with Decision Tree, and Logistic Regression with Decision Tree. We achieve the highest accuracy of 84.68% using the Logistic Regression with Decision Tree ensemble learning model.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Wang, B., Liu, Y., Hao, Y., Liu, S.: Defaults assessment of mortgage loan with rough set and SVM. In: 2007 International Conference on Computational Intelligence and Security (CIS 2007), pp. 981–985. IEEE (2007)
Reddy, M.J., Kavitha, B.: Neural networks for prediction of loan default using attribute relevance analysis. In: 2010 International Conference on Signal Acquisition and Processing, pp. 274–277. IEEE (2010)
Hassan, A.K.I., Abraham, A.: Modeling consumer loan default prediction using Neural Network. In: 2013 International Conference on Computing, Electrical and Electronic Engineering (ICCEEE), pp. 239–243. IEEE (2013)
Hamid, A.J., Ahmed, T.M.: Developing prediction model of loan risk in banks using data mining. Mach. Learn. Appl. An Int. J. 3(1), 1–9 (2016)
Turkson, R.E., Baagyere, E.Y., Wenya, G.E.: A machine learning approach for predicting bank credit worthiness. In: 2016 Third International Conference on Artificial Intelligence and Pattern Recognition (AIPR), pp. 1–7. IEEE (2016)
Odegua, R.: Predicting bank loan default with extreme gradient boosting. arXiv preprint arXiv:2002.02011 (2020)
Sheikh, M.A., Goel, A.K., Kumar, T.: An approach for prediction of loan approval using machine learning algorithm. In: 2020 International Conference on Electronics and Sustainable Communication Systems (ICESC), pp. 490–494. IEEE (2020)
Aurélien, G.: Hands-on Machine Learning with Scikit-Learn, Keras, and TensorFlow (2019)
Jason, B.: Machine Learning Algorithms from Scratch with Python (2016)
Jason, B.: Ensemble Learning Algorithms with Python Make Better Predictions with Bagging, Boosting, and Stacking (2021)
Natasha, A., Prastyo, D.D., Suhartono. Credit scoring to classify consumer loans using machine learning. In: AIP Conference Proceedings (2019)
Jason, B.: Deep Learning with Python Tap The Power of TensorFlow and Theano with Keras (2016)
Acknowledgement
This research is funded by Vietnam National University HoChiMinh City (VNU-HCM) under grant number DS2022-26-03.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2022 The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd.
About this paper
Cite this paper
Binh, P.T., Thuan, N.D. (2022). Predicting Loan Repayment Using a Hybrid of Genetic Algorithms, Logistic Regression, and Artificial Neural Networks. In: Dang, T.K., Küng, J., Chung, T.M. (eds) Future Data and Security Engineering. Big Data, Security and Privacy, Smart City and Industry 4.0 Applications. FDSE 2022. Communications in Computer and Information Science, vol 1688. Springer, Singapore. https://doi.org/10.1007/978-981-19-8069-5_11
Download citation
DOI: https://doi.org/10.1007/978-981-19-8069-5_11
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-19-8068-8
Online ISBN: 978-981-19-8069-5
eBook Packages: Computer ScienceComputer Science (R0)