KATHMANDU: Interest rates on auto loans have fallen sharply in Nepal, with some banks now offering floating-rate loans at below 5%.
The average base rate of commercial banks has declined significantly, allowing banks to offer loans at lower rates. Some banks are adding only around 0.5 to 1 percentage point to their base rate for selected loan schemes.
This has pushed auto-loan rates close to the 5% mark. The lower rates come as banks have high liquidity and demand for vehicle loans is picking up ahead of the festive season.
Customers who booked vehicles during the recent NAIMA Nepal Mobility Expo and NADA Auto Show are also beginning to take deliveries. This has increased demand for auto financing.
Auto loans can generally be taken for up to seven years, making them an important long-term lending product for banks.
Banks are also offering fixed-rate auto loans. Current fixed rates are generally higher than the lowest floating rates, with rates varying according to the bank and loan tenure.
What Nepal’s banks are charging right now?
The actual interest rate depends on the bank’s base rate, premium and loan scheme. Banks with lower base rates can offer cheaper floating-rate loans.
Rastriya Banijya Bank currently has one of the lowest base rates in the banking sector. Its three-month average base rate is 4.01%, effective from September 21, 2026.
Nepal Bank also has a low base rate. Its three-month average base rate is 4.41%, effective from Ashoj 7, 2083.
Some banks have launched special festive schemes with rates below 5%. However, customers should check whether the advertised rate is floating or fixed and what premium is added to the base rate.
Nabil Bank is also offering auto loans for up to seven years. Its current product allows financing of up to 60% of the VAT bill for new private vehicles, including EVs, with loans of up to Rs 8 million.
The cost of borrowing can change significantly depending on the interest rate and loan tenure. A lower rate reduces the interest component of the monthly EMI and the total borrowing cost.
Fixed-rate loans are also available
Customers who want protection from changes in interest rates can choose fixed-rate loans.
Nepal Bank’s current published retail fixed-rate schedule lists auto loans at 7.99% for five years and 8.50% for seven years. Its EV loan is listed at 7.90% for five years and 8.50% for seven years.
This shows the difference between floating-rate offers linked to the base rate and fixed-rate products. Customers should compare the complete loan structure rather than looking only at the headline interest rate.
What documents are needed for an auto loan?
The basic requirements vary from bank to bank, but borrowers generally need proof of identity, income and the vehicle being purchased.
Nepal Bank requires a borrower to be a Nepali citizen who is at least 18 years old when the loan is originated. The borrower must also have a stable and regular source of income to repay the loan.
Common documents include citizenship or National Identity Card, passport-size photographs and family or relationship documents where required.
Salaried customers may need a salary certificate, appointment letter and recent bank statements. Banks may also ask for proof that the applicant has completed the required probation period.
Self-employed customers generally need business registration documents, PAN/VAT certificates, audited financial statements and tax-related documents.
Applicants earning rental income may need a rental agreement, tenant identification and property-related documents.
For a vehicle loan, customers also need an official quotation from the dealer showing the vehicle model, price and specifications.
Nabil Bank, for example, lists citizenship or passport, photographs, bank statements, firm or company registration documents, PAN/VAT documents and income-related documents among its requirements. It also requires an individual PAN certificate for loans above Rs 2.5 million.
