Taking out a car loan will help you build good credit.

Like many people, you may find you will need some added help financing your purchase of a new set of wheels.

Getting a loan will help you pay for the car upfront, while you pay the lender back in smaller increments, usually over the course of a few years. Your interest rate may depend on several things, including your credit score and income, but the average right now is about 5.04 percent for a three-year loan to buy a used car, according to Bankrate.

Once you nail down how much you can spend on a car and the terms of the loan, you can determine how much you can afford red car over a lot of stacked coinseach month. Be sure to cover all your bases in determining this amount, including:

  • Loan payments
  • Insurance fees
  • Registration costs
  • Gas
  • Maintenance, such as oil changes
  • Parking

Business Insider pointed out that first-time auto buyers can take this opportunity to begin building good credit.

Taking out a loan and paying it back consistently on time will help boost your credit score and give you an advantage next time you need to take out a loan, whether it’s for a new car or something else, like a mortgage.

However, if you fail to budget correctly and can’t make the loan payments every month, your credit can become damaged quickly, causing you more problems in the future.

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