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The company wants to understand the driving factors (or driver variables) behind loan default, i.e. the variables which are strong indicators of default. The company can utilise this knowledge for its portfolio and risk assessment.

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This company is the largest online loan marketplace, facilitating personal loans, business loans, and financing of medical procedures. Borrowers can easily access lower interest rate loans through a fast online interface.

Like most other lending companies, lending loans to ‘risky’ applicants is the largest source of financial loss (called credit loss). The credit loss is the amount of money lost by the lender when the borrower refuses to pay or runs away with the money owed. In other words, borrowers who default cause the largest amount of loss to the lenders. In this case, the customers labelled as 'charged-off' are the 'defaulters'.

If one is able to identify these risky loan applicants, then such loans can be reduced thereby cutting down the amount of credit loss. Identification of such applicants using EDA is the aim of this case study.

In other words, the company wants to understand the driving factors (or driver variables) behind loan default, i.e. the variables which are strong indicators of default. The company can utilise this knowledge for its portfolio and risk assessment.

To develop your understanding of the domain, you are advised to independently research a little about risk analytics (understanding the types of variables and their significance should be enough).

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The company wants to understand the driving factors (or driver variables) behind loan default, i.e. the variables which are strong indicators of default. The company can utilise this knowledge for its portfolio and risk assessment.

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