Cash Flow Projections for a Consumer Financing and Loan Servicing Company in the USA

About the Client

The client provides alternative financing for career schools, technical schools, and other training providers. They have established innovative solutions that traditional lenders do not provide, allowing education to individuals with lower or limited credit histories.

The Business Challenge

For a given pool of loans, generate cash flow projections such as total paid, principal and interest, balance, and defaults for each time period.

What Aptus Data Labs Did

Built a Cashflow Model framework based on Monte Carlo simulation since the dynamics of payments, defaults, and other events are all interdependent and inherently uncertain. The model is a multi-period loan-level simulation with modular submodels for - ML-based Probability of Default, Cancellation, Prepayment, Loan Amount Adjustment and Delinquency.

The Impact Aptus Data Labs Made

Accurate cashflow projections by the Model framework developed by the Aptus team provided valuation analysis to the client and insights to identify the healthy pools of loan to finance. The Aptus team built a challenger Probability of Default model with accuracy boosted by 4%, improving the credit underwriting process.

The Business and Technology Approach

Tools Used

R, Python, Amazon EC2, RDS, Postgresql, Quicksight.

The Outcome

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