Enhancing Loan Default Prediction with Human-in-the-Loop and XGBoost Ensemble Learning

Human-in-the-Loop (HITL) Machine Learning with Ensemble Learning uses the best of both automated algorithms and human input in making predictions and decision making when it comes to Machine Learning (ML). In HITL frameworks they include human inputs in model training and validation, allowing the resultant models to be built based on actual needs rather than white algorithms, which may be insensitive to some details otherwise. It is more relevant in such areas or applications that involve higher risk such as credit risk applications in today's financial world where predictions form the basis for major loans' approval. Although previous studies that employed fully automated ML models have some shortcomings that include being prone to giving biased predictions, being less interpretable and scalability issues and failure to handle edge cases hence reducing reliability and trustworthiness. To overcome these problems, this study introduces a new approach of combining the HITL with the XGBoost, which is one of the most potent ensemble learning algorithms to develop a balanced model of loan default prediction. Through the analysis of loan data from Lending Club, this method has attained an accuracy of 99.4% along with a high precision and a high recall, thus pointing to well-rounded performance of the model. Expert knowledge in the form of the HITL loop improves the regularization and optimization of the XGBoost model leading to a better, efficient, reliable, and more interpretable model for credit scoring. It was in python the model was developed taking advantage of the powerful ml and data analysis libraries which make it easy to develop, scalable and reusable for real life organizations especially in the financial arena where precision and accuracy are paramount. This approach lays some basis for subsequent innovations in the ICT applications in HITL ML systems in different fields.