Mobile financing plans - a different way to get a phone contract

Using an iPhone 4

If you’ve got a mobile phone, chances are you got it on a contract: you pay a network every month for two years, and in return you get a phone and a bunch of minutes and texts to use.

Buuuuut… some of us are getting a bit tired of that system. Locking yourself into a contract - stuck with the same phone, allowance, and network for two whole years - simply isn't ideal.

That's why a few companies are offering new ways to pay for your phone. These financing plans work a lot like standard contracts, by letting you pay the cost off over a period of time, but they're a lot more flexible. Whether it's through peer-to-peer loans or split contracts, they let you pay at a pace that suits you, and you can upgrade your phone way sooner.

Read on to see how a few of them work, and we'll help you figure out the best way to get the phone you want.


giffgaff logo

There are two ways of buying a handset from giffgaff: you can either buy it upfront, or pay it off gradually as a peer-to-peer loan.

You have a lot of flexibility over how you pay that loan off, luckily. You can choose how much you pay upfront (up to £200); and how many months you want to pay the rest back over (six, 12, 18, or 24). Watch out though - interest rates are quite high, especially if you spread payments out across a longer period.

So, say you want a 64GB iPhone 8 but can't afford to buy it outright - it's mighty pricey, after all. On a giffgaff loan, you could keep costs low by just spending £25 upfront, then £46.47 per month for two years; or just make it a bit more manageable by spending £200 upfront, then £95.95 per month for six months; or any other combo of payments.

Your phone also comes with a SIM loaded with one of giffgaff's 'goodybags', a monthly allowance of data, calls, and texts, which goes up to its unlimited 'Always on' plans. You don't have to stick with it though - goodybags only last a month so you can cancel it straight away if you want. Besides, your phone arrives unlocked so you can put in a SIM from any network.


O2 logo

When you take out a handset plan on O2, it'll most likely be an O2 Refresh contract. This splits your monthly bill in two: it covers your Phone Plan (payments on your handset), and your Airtime Plan (the cost of your data, minutes, and texts).

That means that once you reach the end of your two-year contract, you won't need to pay the Phone Plan any more - just the Airtime Plan will remain.

It also means that if you want to pay off your phone - to reduce your monthly bill, buy an upgrade, or just to get it out of the way - you can, at any point. (Or, if you want to be rid of the phone altogether, you can trade it in to O2 and put the cost towards paying off your plan.) You'll still need to keep paying the Airtime Plan until that contract runs out, but your bill will be dramatically reduced.

For example… Say you got that 256GB iPhone 8 on O2 Refresh. At the time of writing, that would mean a bill of £35 per month for the Phone Plan, plus £26 per month for a 4GB Airtime Plan - a total of £61 per month. If you wanted to upgrade your phone after a year, you'd have to pay off the final 12 months of the Phone Plan, totalling £420. Then you'd just have a SIM-only deal at £26 per month to keep paying.

Is it better than a standard phone contract?

The best kind of plan for you will all depend on your circumstances. Both financing plans and regular contracts can offer good value deals, so it could be a case of just comparing your options and picking which makes the most sense.

The main downside is that most financing plans are loans - meaning they may affect your credit score. Your rating may drop briefly when you first sign up, and missing payments won't look good.

Pros of a financing plan

  • It spreads out the cost of a mobile phone so it's more affordable
  • It doesn't lock you into a single allowance - or even a single network
  • You can upgrade your phone sooner than you would on a regular contract plan
  • Plans are more flexible than a standard contract
  • It's cheaper and easier to end it early

Cons of a financing plan

  • Loans can affect your credit score - badly, if you miss payments
  • Some plans have high interest rates
  • Traditional phone contracts are a lot more straightforward
  • It's still generally not as good value as buying a phone outright
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