Phones may be costly, but financing solutions have never been more readily available. Carriers typically offer interest-free installment plans; manufacturers like Apple and Samsung provide payment or upgrade plans independent of a carrier contract.
Other possible solutions for financial needs and preferences could be personal loans and credit cards that typically require higher credit scores to qualify. Deciding the most appropriate option depends on both financial circumstances and preferences.
1. Retail financing
As smartphones can be so costly, there are multiple ways to make them more manageable if you lack the cash up-front to purchase one. Retail financing through carriers, retailers, or manufacturers often provides the most economical solution – often offering zero-interest promotions lasting a few years and generally offering greater flexibility than credit cards, which charge regular annual percentage rates (APRs).
Samsung, Apple, and Verizon Wireless all offer financing plans for their phones that allow you to purchase one with monthly installment payments that often require a down payment. In some instances, trade-in deals for your old device can further lower upfront and monthly costs; however, these plans don’t typically help your credit score and may come with penalties should you break the contract early.
Other retailers and credit card issuers also provide phone-financing deals. Chase and American Express both offer cards that allow cell phone purchases with 0% promotional APR for two years, though these offers differ from installment plans in that they require opening a new credit card account and could charge interest on any unpaid balances after their promotional period has expired.
Klarna, Afterpay, and Sezzle offer smartphone financing apps that let you divide the cost of a phone into interest-free installments over several payments due every two weeks. These applications are ideal for people who want to avoid the hassle and fees associated with traditional loans; some even provide loans without credit checks and have minimal paperwork requirements such as ID proof and bank account details.
2. Credit cards
Smartphones are costly purchases that can become even more expensive without an appropriate financing solution in place. Financing may involve conducting a credit check, which could temporarily lower your score, but retailer or servicer financing often has lower rates and terms than those available on credit cards, while personal loans tend to offer better terms than payday or title loans. Furthermore, using apps like MoneyTap makes purchasing smartphones on installment plans easy: approved customers can convert their loan approval instantly into a line of credit repayment in flexible monthly installments.
3. Line of credit
With your smartphone and internet connectivity, it is possible to obtain cash advance loans from various lenders via mobile applications. Most apps are free for download but may require that your details and phone number are disclosed to lenders; as with any loan agreement, be sure to read its terms and conditions thoroughly.
Many cell phone manufacturers and wireless carriers provide financing options for their products. This can help you manage the costs associated with purchasing new phones or accessories while paying them off with monthly installment plans – without negatively affecting your credit score or reporting to major credit bureaus.
Similar to a credit card, a line of credit requires satisfying specific eligibility requirements and paying back both principal and interest on time. While not suitable for significant one-time expenses, such as college tuition payments or home improvements, it could provide ongoing financing of projects or purchases requiring smaller sums than traditional loans would allow.
Requirements for personal lines of credit vary but typically include income verification and meeting a minimum credit score requirement. Your lender may impose an annual or monthly maintenance fee and charge transaction/draw fees each time funds are accessed from your line of credit. Avoid incurring additional interest charges by borrowing only what is within your means to repay, paying your balance in full on time every month, and repaying all interest charges in full each time. Before applying for a personal line of credit, it’s a wise idea to research all available options and rates before making a decision. Jacqueline DeMarco, an editor and writer who specializes in personal finance writing, has appeared in multiple publications such as Credit Karma, The Everygirl, and Northwestern Mutual – she currently resides in Southern California.
Wireless carriers typically offer financing and leasing arrangements for smartphones; however, these arrangements rarely help build credit since these arrangements don’t report activity to any of the major credit bureaus.
Smartphone technology is rapidly developing, so leasing could be an excellent way to upgrade regularly without incurring the total costs associated with buying them outright. At the end of a lease term, you have two options – either purchase by paying a buyout fee or return and lease another model.
Lease agreements do have some downsides, like renting an apartment or vehicle. Also, cellphone service must be purchased separately from monthly lease payments.
5. BNPL apps
Buy now, pay later apps provide shoppers with an alternative payment method for purchases through both online and physical retailers without immediate payment. Famous examples of such apps are PayPal Credit (formerly Bill Me Later), Afterpay, Zip, and Klarna; similar to credit cards, they typically require a soft credit inquiry before being approved as lenders and setting interest rates and spending limits; typically, these have smaller credit limits making them better suited for smaller or medium-sized purchases.
Some BNPLs report payments to credit bureaus, helping build your credit history with timely payments. Others don’t, which can be an issue if your file doesn’t already contain much credit history, and their terms may be less advantageous compared to credit card offers in terms of late fees and over-the-limit charges.
Buy now, pay later apps are an easy and cost-effective way to finance purchases that you are confident you can afford by the due dates; just be careful that your purchases do not exceed your limit! These services can become intrusive tattletales that undermine your credit score every time you miss a payment; additionally, any outstanding debt may end up in collections, which further damages it and your score. Consumer Reports recently conducted an evaluation-based scorecard of eight popular BNPL apps and gave evaluation-based scores in five categories such as safety, privacy, and transparency. PayPal stood out with excellent scores in each category, while Klarna, Sezzle, and Zilch also showed promising performances.