Phone Financing: Is It Really Better Than Paying Right Away?

Are you planning on buying a new phone? Are you just as confused if a phone financing plan will be better than paying right away?

We got your back in that case!

Cell phone financing is the process where total cost of your cell phone is divided by the number of months the contract is for. Then is added to the normal plan price.

For instance, if the phone that you want to purchase costs around $1,200 and your phone financing contract plan is for two years, you are liable to pay an extra $50 per month.

While phone financing may seem quite tempting, can it actually be economical?

Does it actually save you money, or is it a delusion because the cost is spread out over many months?

However, we suggest that it is best to buy a cell phone straight away, but phone financing is something you can opt for if the situations are alike. Phone financing costs the same, with even better financing options available now than before.

To help you get a better picture of phone financing, we did some digging. And came up with a comparison on if phone financing is better than buying a mobile phone right away.

I hope that this article will help you sort out what is best for you and your budget.

Key Takeaways

What Is Phone Financing? 

In simple terms, smartphone financing lets you make payments over a contractual period of time. You make a choice of your phone and apply for phone financing. Once approved, you’ll have to make a small initial down payment. Then you’ll have to continue making the rest of the balance through installments.

Selective types of smartphone financing do not require a down payment, while some may involve a revolving line of credit.

The terms and conditions for financing may differ depending on the location of your purchase. It also depends on the amount that you are paying for it. For instance, the repayment period for the balance maybe 24 or 36 months.

Phone financing may be advertised at a 0% rate of interest when it is paid in full within the given count of months. However, this does not mean that phone financing is totally interest-free.

Let’s say you are taking the benefit of the 0% financing offer. Then, it is possibly disguised as a deferred interest promotion.

If you default in paying the total amount by the end of the contractual period, you will be liable to certain interest charges that retroactively apply to your initial purchase amount.

You may need a credit check to be able to qualify for phone financing, additionally with other qualifications to meet the eligibility criteria for a phone financing plan.

Buying A Phone Right Away Vs. Phone Financing

Let us go through the differences in pros and cons of phone financing vs. buying a phone right away.

Unless you have a thousand bucks lying around, you will not be able to buy a Samsung Galaxy or iPhone. So, the reason why people mainly opt for phone financing is to avoid paying that big an amount together at a time.

In the end, it does come with 0% interest. So, if you are staying on par with your bills, you would not have to pay any more than what the phone actually costs.

Is It Cheaper To Get Phone Financing Compared To Buying A Phone Right Away? 

However, it is always better to buy a phone right away; there is not much of a difference if the cost of buying a phone right away is compared to the cost that you have to incur if you go for phone financing.

Phone financing just splits the entire bigger amount among the contractual months that involve no real tricks.

With that being said, you can always save some extra bucks if you purchase a secondhand phone or exchange your old phone for credits to purchase a new phone.

Types Of Phone Financing

Depending on the provider, phone financing can be divided into various forms. It is important to be able to compare financing terms.

Here are the types of phone financing options that you may want to look for based on your convenience.

Retail Smartphone Financing

This is the first option if you are looking for convenient phone financing options. For instance, Best Buy offers a 24-month financing plan on Geek Squad purchases and unlocked phones above a certain amount.

You will need a Best Buy credit card to be able to access this type of financing. You will not be charged any interest as long as you have paid the balance in full within 24 months of the purchase.

Phone Company Phone Financing

The next most convenient way to get phone financing is to go through the service provider of your cell phone. For example, Verizon allows its eligible customers to pay for devices via installments with zero interest and no finance charges.

You will have to sign a two-year contract to benefit from this plan, to which an upgrade fee is applicable.

Phone Manufacturer Financing 

Based on the manufacturer of the phone that you wish to buy, you may still get phone financing options. Both Apple and Samsung, for example, provide promotional financing to customers who want to buy new smartphones and wish to pay the amount over time.

While for Apple, you will need an Apple card; for Samsung, you will need a financial account.

BNPL Financing

Buy now, pay later represents a well-popularized trend in short-term financing. The BNPL platform allows customers to make a purchase with a small down payment and then pay off the rest of the balance in four or multiple installments.

Challenges Of Phone Financing 

While cell phone financing may seem like a very feasible idea for many, it may not be for others. There are risks involved in the case of the company and the customers as well. First of all, the company trusts the customer to pay back the installment in full after they give away the phone with a small down payment. Although there are contracts involved, there is always a risk factor that works when it comes down to trusting the customers. 

The most considerable risk that is involved on the side of the customer is the damage to the device. It is a mobile phone, after all. The installment payments last for at least 24 months at max. There is no guarantee that the phone will function efficiently throughout the whole time period. Also, there is a possible risk of someone stealing the phone or it getting lost. In that case, the customer faces a substantial loss as the money goes down for nothing. 

Also, companies launch their latest models of smartphones every two to three years. Imagine paying installments for the latest model of a phone only to realize that by the time the installment period is over, there will be a newer version of the same phone in the market. This cycle goes on and on. 

Benefits Of Phone Financing 

While these were only the setbacks of phone financing, there are benefits as well. These benefits have made the process of phone financing popular and a well-preferred option among customers. 

When companies offer options for phone financing, they win the trust and likes of the customers, as it is not always possible for everyone to pay the amount for the phone in one go. 

Customers, on the other hand, get the benefit of using the newest smartphones in the market. The best part is the customers would not even have to pay in full at the time of purchase. EMIs are one of the favorite options of customers when it comes to phone financing. 

Also, EMI offers come with many attractive offers and discounts, which further churn the interest of the customers to make a purchase with phone financing. These offers reduce the overall price of the phone by discounting the installment amount that the customers pay. It is actually more economical to pay discounted installments than paying a discounted amount in full. 

Brands that offer phone financing position themselves as dependable and trusted mobile phone brands in the mobile industry.

The Bottom Line 

Phone financing sounds like a good plan if you do not have a lump sum amount of cash just lying around or if you do not wish to pay the total altogether at a time. Other than that, there is not much of a difference in the amount that you might have to pay if you had it straight away.

However, I hope this article was insightful enough for you and will help you in sorting your phone financing budget accurately.

If there is anything else that you feel curious about, feel free to drop a comment below, and I shall be here to answer them all.

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