Here’s something you might not know about car loan in Nepal – you can get up to 60% of the price of your electric car financed. Regular cars, however, are only allowed 50% financing.
The auto loan interest rates in Nepal are highly competitive. They offer loan at competitive interest rate in either fixed or variable interest rate. There are special schemes for EV loan, that generally have lower interest rates. You can opt for flexible financing and repayment options that last up to 7 years.
Car financing plans might look complex at first. Reading this article will acquaint you with car loans in Nepal. You will learn about application requirements and how to get approval that will facilitate your journey toward car ownership.
Understanding Car Loans in Nepal
Your dream vehicle is more affordable with a car loan in Nepal. Banks and finance companies offer financing for new and reconditioned vehicles. They offer different financing schemes based on your vehicle category and usage.
Most of the banks will give a maximum of 50% of the buying price of your car. The electric cars under the Green Drive Scheme are even more affordable – financing up to 60% of the price.
Your net monthly earnings are also the deciding factor when it comes to the loan value. Banks prefer to sanction 30 times your net monthly income. Your installment should not be more than 50% of your gross pay or 80% of your disposable income.
The loan qualification process has specific requirements. Your gross monthly income, combined with your spouse’s or family members’ income, should be at least double the monthly loan payment. You must be a Nepalese citizen above 21 years with a steady income from either salary or self-employment.
Banks take security measures by registering the vehicle in their name and requiring complete insurance coverage with third-party protection. They also need personal guarantees from acceptable individuals as extra security.
The Equated Monthly Installment (EMI) system lets you choose payment options that line up with your financial situation. Relationship managers can guide you to pick the best financing option that matches your needs.
Car loan interest rate in Nepal
Interest rates determine how much your car loan will cost in Nepal. Recent data from fiscal year 080/081 shows auto loan interest rates between 6.39% and 15%. These rates vary among banks and financial institutions and depending upon the scheme and vehicle type. Comparatively, loan for EV purchase is in lower end.
Banks offer different rates based on vehicle types and purposes. Global IME Bank currently has Auto Loan and Green Drive for EV vehicle loan.
Interest rates shape how people and businesses decide to buy vehicles. These rates influence:
- The timing of purchase
- Choice between fixed and floating rates
- Length of loan term
- Bank selection
The total cost of borrowing depends on:
- Principal loan amount
- Interest rate type (fixed or floating)
- Compounding frequency
- Loan duration
Banks structure auto loans with either fixed or floating rates. Fixed rates stay the same throughout the loan period and provide predictable monthly payments. Floating rates change with market conditions and can lead to varying EMI amounts – the EMI may increase or decrease depending on the marketing condition. You can calculate your EMI using our EMI calculator.
Banks generally add a premium of upto 3.50% above their base rate in floating rate of auto loan.
Preparing Your Car Loan Application
Getting your car loan approved starts with good preparation and the right paperwork. Your chances of approval go up when you have all your documents ready before you apply.
Essential Documents for Personal Verification:
- Photograph (2 copies each)
- Citizenship certificate of applicant/guarantor.
- Relationship Certificate, Marriage Certificate (as applicable)
- Firm/Company Registration Certificate (as applicable)
- PAN/VAT Certificate (as applicable)
- Article of Association (AOA) and Memorandum of Association (MOA) (as applicable)
- Partnership Deed (as applicable)
- PAN Certificate (as applicable)
- Location Map (Residence & Office)
Income Verification Requirements:
- Proof of Income / Salary certificate
- For business entities, audited financials of last two fiscal years, tax clearance certificate, bank statement of at least six months
- Relevant income documents as deemed necessary to prove the income source.
Pension holders can show their pension certificate as proof of income. People who receive money from abroad need to provide their remittance slips, passport with valid visa, and insurance papers.
Financial Requirements and Eligibility:
- Your monthly income should be twice the EMI amount
- EMI payments can’t be more than 50% of your gross income
- You should have at least 20% of your income left after EMI
Vehicle-Related Requirements:
- A detailed insurance policy that includes third-party coverage
- The vehicle must be registered under the bank’s name
- You need personal guarantees from qualified people
Additional Requirements:
- You must be at least 21 years old
- You need a steady income from a job or business
- Your credit history should be clean with no defaults
Business organizations seeking car loans need to be registered with the government. The individual has to apply for the loan personally and be self present – they cannot send someone else. If you qualify and prepare accordingly, banks will approve your loan. The bank look at your consistent income, credit record, and ability to pay the loan.
Step-by-Step Auto Loan Application Process
Auto loan is a systematic process leading to hassle-free approval. You can start with an EMI calculator to compute your monthly installments and check if you qualify for a loan.
Initial Documentation and Assessment
Start by gathering all the required documents like your citizenship certificate, passport photos, marriage certificate (if applicable), and salary/income certificates. You will require bank statements and required details to validate your income. Businessmen will also need firm registration certificates, PAN/VAT certificates, and two years of audited accounts.
Vehicle Documentation Requirements
Next is the acquisition of the vehicle quotation price and blue book data for the existing vehicles. Prepare the security or collateral documents pertaining to all the security or collateral you’ll be offering as exchange for the loan.
Application Submission
Process Finish your paperwork and submit your application with your preferred financial institution. Banks now have streamlined application processes with fast approvals. Bank relationship managers will assist you in making better financing decisions by advising you.
Post-Application Steps
The bank reviews your application and paperwork. The bank usually look for, income source verification, credit history assessment, CICL record, collateral examination, final review and approval. The loan process is simple and convenient, with funding up to 60% provided to qualified borrowers.
Keep in touch with your relationship manager throughout the process. They will guide you and help process your application faster.
Frequently Asked Questions
What are the basic requirements for a car loan in Nepal?
To qualify for a car loan in Nepal, you typically need to be a Nepalese citizen above 21 years old with a steady income source. Your monthly income should be at least double the proposed loan installment. You’ll need to provide personal identification documents, income proof, and vehicle-related information.
How much can I borrow for a car loan in Nepal?
The loan amount depends on your income and the type of vehicle. Generally, banks offer up to 50% financing for petrol vehicles and up to 60% for electric vehicles.
What are the current interest rates for car loans in Nepal?
Auto loan interest rates in Nepal vary depending on the bank and loan type. Some banks offer competitive rates starting in floating interest loans. Check the latest interest rate to know more.
How long does the car loan approval process take in Nepal?
The approval process duration can vary depending upon the documents provided, requirement of buyer and vehicle seller. To expedite the process, ensure you have all required documents and maintain open communication with our bank’s relationship manager throughout the application stages.
