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What are the pros/cons of different phone payment types?

There are a number of ways to pay for your phone. These types include monthly installments, early upgrade, lease or prepaid.

Contract is another choice but most carriers (other than Sprint) have stopped selling contracts in favor of month to month plans where you aren't locked into a specific plan for 2 years. 

Below are some of the things to consider before buying a new phone:


Monthly Installments - you pay a small amount upfront and then spread the remaining cost over a period of (usually) 24 months. Once you complete the payments you own the phone


  1. Lower upfront cost (sometimes $0 down)
  2. 12-30 month payment plan
  3. Most common phone payment type


  1. You don't own the phone until you pay it off
  2. Locked into a finance contract as well a shaving to stay with the carrier until the finance is paid off
  3. If you damage your phone you have to buy a new one (unless you have insurance)
  4. You would have to pay Early Termination Fees (ETF) to switch carrier during the payment term
  5. Need good credit 


Early Upgrade - same as a monthly installment plan, slightly higher cost as you are allowed to upgrade to a new phone inside the existing term. Usually upgrades are allowed once during the term. The agreement resets / extends when you upgrade so be aware!


  1. You can upgrade to the newest device in as little as 6 months
  2. Pay a small upfront cost for the device, like monthly installments
  3. Less fees than other payment types


  1. You don't own the phone until you complete the payment term
  2. Locked into a contract agreement
  3. If you damage your phone you have to buy a new one (unless insured)
  4. You will pay more each month than for a standard monthly plan


Lease - similar to monthly installments, however you don't own the phone at the end of the term - same as a car lease. You can buy the phone by paying a final value fee at the end of the term though


  1. Pay a small upfront cost for the device
  2. Lower monthly costs than monthly / finance plan


  1. You don't own the phone - even if you complete the term in full
  2. If you break it, you buy it
  3. Locked into a contract agreement


Prepaid - you have to pay the full price of the phone at the start but you do own it straight away and there are no monthly payments


  1. You aren't stuck in a contract
  2. You pay as you go
  3. You own the phone
  4. No credit check
  5. More devices to choose from


  1. You have to purchase the phone outright when signing up
  2. Limited range of phones - not all carriers have the same range
  3. High upfront costs for a new top spec phone


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