Factors Influence Loan Default–A Credit Risk Analysis

Loan default has been a severe and critical issue for both lenders and borrowers. Default on loan payments not only reduces the profitability for lenders but also affects the credit rating of borrowers. This work aims to analyze the factors that influence loan default status, which closely determines credit default risks. To answer this question, this paper first regresses the data to explore the variables which have a significant effect on loan status. Secondly, it conducted a comparison analysis between loan defaulters and non-defaulters, to find the main characteristics of the two groups. Then, a factor analysis is exercised to reduce the dimensions of the continuous variables and to seek the correlation between them. At last, this work regresses the data using variables after dimension reduction. The results show that credit default can be affected by several factors, which can be used to determine credit decisions for lenders.