Optimizing Lender Portfolios: A P2P Lending Recommendation Approach

Abstract

The proliferation of peer-to-peer (P2P) lending platforms has ushered in a new era of financial accessibility, but it has also brought to the forefront the growing concern of loan defaults. This paper explores the increasing significance of P2P lending platforms and addresses the critical issue of loan default prediction. The study focuses on the application of machine learning techniques, specifically employing the Random Forest algorithm and logistic regression, to train a predictive model for assessing the likelihood of default within a loan portfolio. The primary objective is to enhance the decision-making process for lenders by recommending optimal loan portfolios based on the predictive insights generated by the model. By leveraging the capabilities of this robust algorithm, the research aims to contribute to the advancement of risk assessment methodologies in P2P lending, ultimately fostering more informed and secure lending practices on these platforms. We trained and compared logistic Reression and random forest models and derived resultant optimal portfolio by considering both the models which is intended to give better results than a single model. © 2024 IEEE.