For detailed analysis, please follow the Tableau Link:
Introduction
- Objective: Evaluate current loan clients' behavior and identify trends to increase number of low-risk borrowers
- Focus Areas:
- Analyze customer demographics, financial factors, and loan purposes
- Identify high-risk profiles and growth opportunities
- Key Recommendations:
- Targeted marketing for low-risk segments
- Age-specific loan products
- Enhanced risk controls for business and vacation loans
- Dashboard for real-time trend monitoring
Methodology
- Data Preparation:
- Cleaned data by removing duplicates, handling missing values (via imputation), and standardizing variables like loan amounts, durations, and client demographics.
- Filtered data to focus on relevant client segments and loan attributes for the analysis.
- Analysis workflow:
- Conducted exploratory data analysis (EDA) to uncover patterns and outliers.
- Segmented clients based on demographic (age, gender) and financial factors (account balances, housing status).
- Applied statistical techniques to identify correlations between client attributes and credit risk.
- Built visualizations to track loan purposes, amounts, durations, and high-risk trends across segments.
Findings and Insights
Recommendations
Recommendations are tailored for each department to develop strategies aligned with the shared objective
Marketing &Sales team
1. Targeted Marketing for Low-Risk Segments
- Focus Groups: Male homeowners with 2-3 jobs and stable savings/checking accounts with an aim to buy car or TV
- Rationale: These clients represent the typical low-risk profile and have shown consistent financial behavior. Marketing efforts directed at this segment are likely to yield safer loans.
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Product team
2. Introduce Age-Specific Loan Products
- For Young Adults (High-Risk Segment):
- Offer smaller loan amounts with shorter durations to reduce risk.
- Pair loans with financial literacy programs to improve repayment behavior.
- For Middle-Aged Clients (Low to Medium Risk):
- Provide larger loans for stable purposes like home improvement or education.
- Rationale: Tailored loan products align with financial needs and risk tolerance for each age group. This encourages more borrowing while managing risks effectively.
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Business Development team
3. Incentivize Business and Vacation Loans with Risk Controls
- Business Loans: Partner with local businesses to provide guarantees or collateralized loans.
- Vacation Loans: Introduce capped loan amounts and shorter terms to mitigate risk.
- Rationale: These purposes have the highest average loan amounts and durations. By adding stricter controls, lenders can safely expand these loan categories.
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Data Analytics & IT team
4. Build a dashboard for the management team to keep track of and observe the trend over time
- Leveraging existing customer and financial data to identify trends in loan purposes, risk profiles, and borrower demographics.
5. Use Data-Driven Risk Models for Pre-Approval
- Leverage existing financial and demographic data to pre-approve low-risk clients.
- Use dynamic risk models to flag high-risk borrowers early and adjust loan terms accordingly.
- Reason: Automating risk detection ensures safer lending and improves efficiency in borrower onboarding
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