Determinants of Loan Prepayment and Comparison of Machine Learning Approaches

This paper examines factors affecting on repayment behavior of borrowers to build a model for predicting whether borrower is likely to prepay the loan or not. In this article, we use machine learning (ML) approaches and individual transaction level data on car loans obtained from one of the commercial banks in Uzbekistan. The findings of this paper highlight the necessity of proper pricing for controlling early repayment. The finding of this study, are applicable to banks, individual lenders, and investors in their estimation of prepayment risks of car loans.

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