Loan Approval
Prediction using
Machine Learning
A robust solution for automating and enhancing loan eligibility
decisions.
Project Objectives
Automate Decisions Build Predictive Model
Predict applicant eligibility to reduce manual Classify applicants as eligible/not eligible using
workload and minimise risk in banking. supervised learning.
Implement Data Preprocessing Evaluate Performance
Clean and prepare datasets for optimal model Assess model accuracy using various metrics and
performance. explore multiple algorithms.
ML Goals Achieved
Automated Decisions Improved Speed
System evaluates applications without human Reduces decision-making time significantly.
intervention.
Consistent Accuracy Fairness
Predictive accuracy comparable to human underwriters. Ensures consistent criteria, reducing human bias.
ML Implementation Pipeline
Data Loading & Inspection
Initial examination for missing values and data types.
Data Preprocessing
Handling missing values and encoding categorical data.
Exploratory Data Analysis (EDA)
Understanding data distributions and relationships.
Model Building & Training
Developing predictive models using selected algorithms.
Evaluation & Optimization
Assessing model performance and fine-tuning parameters.
Prediction & Deployment
Generating loan predictions and deploying the system.
Technical Deep Dive
Programming Language & Tools Dataset
• Language: Python • Source: Kaggle – Loan Prediction Dataset
• Libraries: pandas, numpy, sklearn, pickle • Features: Gender, Income, LoanAmount, Credit
• Environment: Jupyter Notebook / VS Code History, etc.
• Target: Loan_Status (1 = Approved, 0 = Rejected)
• Size: 614 rows × 13 attributes
Data Preprocessing ML Model & Split
• Missing Values: Mode/Mean/Median imputation. • Algorithm: Random Forest Classifier
• Categorical Encoding: Label Encoding, One-Hot (sklearn.ensemble)
Encoding. • Reason: High accuracy, ensemble learning, less
• Feature Selection: Dropping non-informative columns. overfitting.
• Train-Test Split: 80% Training, 20% Testing.
Loan Approval Algorithm
Load Data
Import datasets and inspect for initial understanding.
Preprocess
Handle missing values and encode categorical features.
Split Dataset
Separate into training and testing sets (80/20).
Train Model
Initialize and train Random Forest Classifier.
Evaluate & Save
Assess performance and save the trained model.
Deploy
Implement Flask application for web-based predictions.
Prediction Output & Future Scope
Sample Prediction Output Future Enhancements
• Larger, diverse dataset.
Appl Gen Inco Loan Credit Predicti
• New features (e.g., debt-to-income ratio).
icant der me Amt History on
• Advanced models (XGBoost) & parameter
A001 Male 4500 128 1 Approve tuning.
d • Real-time web app deployment
(Streamlit/Flask).
A002 Fema 2800 100 0 Rejected
le • Reinforcement learning via feedback loops.
A003 Male 6000 200 1 Approve
d
Applicants with good credit history and stable income are more
likely to be approved.
Conclusion
Streamlined Decisions Robust & Fair
ML transforms loan approvals, making them faster and High accuracy with Random Forest Classifier, reducing
more accurate. manual bias.
Practical Deployment Future-Ready
Flask integration provides a user-friendly interface. Foundation for continuous improvement and real-time
integration.
