The assessment's goal is to predict the loan risk or quality (loan repayment) on a given applicant.
Using Machine Learning approach may be better approach as it provides a sharp edge to companies by performing credit risk assessment based on past data in anticipating risks due to uncertainities.
But it's important to have a clear understanding of our data beforehand and our specific problem domain before applying these techniques. This can help ensure that we choose the optimal solution and avoid potential pitfalls.
To predict the loan repayment, we must undestand how the loans are approved in the first place.
Loan approval process follows such stages:
· After the loan application is recieved, risk assessment is done to approve the loan.
· After the loan is approved, it gets funded.