Boats can cost anywhere from $10,000 for a smaller used boat to hundreds of thousands of dollars for a luxury yacht. A boat loan can help make your dream boat purchase a reality, but you need to have sufficient income and good credit to qualify.

How to qualify for a boat loan

Lenders want to ensure that you can repay your loan — and that the collateral is worth what you borrow. To apply for a loan, you need to provide some basic financial information, and be aware of the most common requirements before applying to ensure a smooth application process.

To apply for a loan, you need to provide some basic financial information. These are the most common requirements when applying for a boat loan.

U.S. citizenship or valid visa

Most lenders require you to be a U.S. citizen or a legal permanent resident. Commonly accepted identification includes a driver’s license, passport or other government-issued ID.

Working bank account

Your bank account and bank statement serve as a way to verify your income and spending history. Your lender can also deposit funds right into your bank account if you are approved for a loan — and set up automatic payments to withdraw so you don’t miss a due date.

Good credit score

Typically, a FICO credit score of 670 or higher is considered good, but credit score requirements vary between lenders, with most requiring an excellent score. They want to see that you don’t have any major credit issues in the past three to five years, such as trouble making loan payments, bankruptcy or foreclosure.

If you’re unsure as to why your score is what it is or what credit issues you may have, you can check your credit report at one of the three credit reporting bureaus or for free at annualcreditreport.com.

Consistent work history

When you apply for a loan, lenders want to see that you have reliable employment. This gives them assurance that you will be able to make payments on your loan.

Most require you to submit income verification, such as a tax return or recent pay stubs, to show that you are employed or have another steady source of income.

Sufficient income

Your tax returns and pay stubs can also serve as a way for lenders to see your total income, as most consider multiple forms of income to determine how much money they will lend you. This includes your work income as well as government benefits, child support and alimony.

Debt-to-income ratio

The debt-to-income ratio (DTI) is your monthly debts divided by your gross monthly income. Lenders typically see 36 percent or lower as a favorable DTI. However, some lenders may approve you for a loan even if you have a higher DTI percentage, although you’re likely to be offered a higher rate and less favorable terms.

If you prefer to do the math, you can calculate your DTI by adding up all your monthly payments and dividing them by your total monthly income or you can use a DTI calculator.

Marine survey report

When lenders give you money for a boat, they want to make sure that they know the boat’s value. A boat loan often requires a marine survey report, which assesses the boat’s value much like an appraisal report gives the value of a home.

How qualification changes across lenders

Each lender has a specific set of requirements you need to meet. For example, LendingClub, which started as a peer-to-peer lender, requires that you are 18 years of age, have an existing bank account in the U.S. and have a good credit history to qualify for one of its personal loans.

On the other hand, applicants must know which boat they plan to purchase, among other common loan requirements, to qualify for a boat loan through U.S. Bank.

Thoroughly check the websites of lenders you are considering before signing on the dotted line to make sure you meet the minimum requirements. If you can’t find the eligibility requirements on the website, contact customer service or check the terms and conditions guide on the lenders website.

Types of boat loans

There are two primary types of boat loans: secured and unsecured. Most lenders offer both options and the best type for you is dependent on your credit and financial situation.

Secured boat loans

A secured loan is a loan that is backed by collateral. The item used as collateral can be repossessed by the lender if you miss payments or make late payments on the loan. The boat itself will be used as collateral in almost every case, just like a vehicle would be for a car loan.

Unsecured boat loans

Unsecured loans don’t require any collateral. However, this means they typically have higher interest rates and less favorable terms for borrowers. The benefit of unsecured loans is that you don’t risk any collateral being seized if you make a late payment. An unsecured loan could be a personal loan from a bank or online lender or a peer-to-peer loan.