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Everything You Need to Know About Financing a Cell Phone

Finance a Cell Phone - What You Need to Know
Jacqueline DeMarco
Jacqueline DeMarcoUpdated August 25, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
A new cell phone can cost hundreds of dollars, making it a substantial investment. It’s no wonder then that consumers may find it hard to pay for a new phone in one lump sum. Fortunately, there are ways to finance a cell phone to make the purchase more manageable. Discover what cell phone financing is and how the process works. 

What Is Cell Phone Financing?  

Financing a cell phone simply means paying off the phone over time. This can be done through a third party (such as a personal loan or credit card issuer), the phone’s manufacturer, or the wireless provider. 

How Does Financing a Cell Phone Work? 

This process varies depending on how you choose to finance your cell phone. It may involve an installment or payment plan that you pay off monthly. Or it could be a line of credit that you pay regularly. Either way, you may need to pay interest as well. 

Pros of Financing a Cell Phone

There are two key advantages to cell phone financing you may want to consider: 
  • It can spread out the cost of a large purchase. This is the primary perk of a cell phone financing plan. It lets you avoid making a large payment out of pocket.
  • It can help you build credit. If the creditor reports payments to the three main credit bureaus (double check to make sure they do), your credit score can improve if you consistently make your payments on time. 

Cons of Financing a Cell Phone

Cell phone financing also comes with some downsides, however, that are worth being aware of. 
  • An application can harm your credit score. Applying for new financing can lead to a hard credit check, which can temporarily lower your credit score.  
  • Late payments can result in debt collections. If you fail to make your payments on time, it can damage your credit score. Eventually, your debt could be sent to collections which will hurt your credit even more. 

Cell Phone Financing Options 

There are several ways to finance a cell phone, including:  

In-Store Financing

You can finance your cell phone at the time you buy it in-store through the wireless carrier that sells the phone. Typically you can sign up for an installment plan that you pay off monthly. A down payment may be required. This option won’t help your credit score, however, because wireless carriers don’t report payments to the major credit bureaus. 

Personal Loans 

Personal loan uses can run the gamut from covering home renovations to financing a cell phone. Most personal loans are unsecured, which means they don’t require collateral. Interest rates can vary, depending on your credit score, so you’ll want to check out the average personal loan interest rates ahead of time. Repayment terms for personal loans are typically seven years or less. Personal loan qualifications depend on a number of factors, including your income, your debt to income ratio, and your credit score. If you have a good credit score, you’re more likely to qualify for a better interest rate and terms. After you apply, you will need to be approved. The time to get a personal loan payment is typically several days to a week. Recommended: Personal Loan Tips That Can Help You Get Approved

Credit Cards

You can use your credit card to finance a cell phone purchase, which is typically quick and easy to do. Just be sure to make payments on the card each month to keep your credit in good standing. You may even want to consider getting a new credit card to finance your cell phone — one with a 0% introductory APR offer. That way, you can avoid paying interest for a period of time. 

Manufacturer Financing 

Some phone manufacturers offer their own financing options, such as providing a line of credit similar to the way a credit card works. Typically, they report payments to the credit bureaus, so on-time payments can help boost your credit score. 

Service Provider Financing

Wireless carriers may also offer a payment plan you can use to buy a phone through them. You pay monthly installments, often with no interest, though you may need to make a down payment at the time of purchase. Your carrier may offer a discount if you go the monthly installment route; be sure to ask. 

Which Cell Phone Financing Option Is Best for You?

The right financing option depends on your credit score, which can impact the interest rates you may pay, and the potential deals offered by the phone manufacturer or wireless carrier. Check into the different options to help determine what’s best for your needs.  

The Takeaway 

Financing a phone can help ease the financial strain of making an expensive and important purchase. There are many financing options to consider, and you may be able to find a line of credit, servicer financing, in-store financing, or a personal loan with lower interest rates. No matter which option you choose, be sure to make your payments on time to keep your credit in good standing. If a personal loan is one of the options you’re exploring to finance a cell phone purchase, Lantern by SoFi can help. With our personal loan comparison, you can easily and conveniently shop for a loan with different lenders to find the one that’s best suited to your needs. 
Photo credit: iStock/Vectorig
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.LCPL0722013

Frequently Asked Questions

How can you finance a cell phone?
Can you use a personal loan to finance a cell phone?
Are there any benefits to financing a cell phone?

About the Author

Jacqueline DeMarco

Jacqueline DeMarco

Jacqueline DeMarco is a personal finance writer and editor based in Southern California. While she spends the bulk of her time writing about complex financial issues, she also tackles a variety of subjects ranging from food to fashion to travel. Her work can be found across dozens of publications such as Credit Karma, LendingTree, Northwestern Mutual, The Everygirl, and Apartment Therapy.
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