Pros and cons of paying off your phone monthly in NZ

Buying a new mobile phone is not an easy decision. We rely on our mobiles so much nowadays that it is essential to have a device that suits you and that you feel comfortable with. Generally, you have two options: you can buy a mobile phone and pay it in full, or buy one through monthly payments, almost always through a cellular plan. 

What should you consider before going on a hunt for the best mobile deals? 

The pros

Getting a perfect deal. 

If you compare mobile plans carefully and you take your time to find the best offer, you can get a better deal- long term. Plenty of companies will give you a mobile with a significant discount, as long as you purchase it from them along with a mobile plan. If you are not satisfied with what you found so far, you are always free to negotiate with your current company and see if there is anything else they can offer you. 

The phone of your dreams. 

There are times when you want to buy a new mobile phone, even though it is more expensive than what you can afford at the moment. However, it is everything you need and much more, and you could easily afford to buy it with monthly payments.

As long as you get a good deal and you don’t pay more than it’s worth, you should consider buying the device of your dreams with monthly payments. 

Saving money in the long term. 

When you buy a phone with monthly payments, you tend to buy a more expensive one. One that you couldn’t afford easily compared to an upfront payment. This means that there are smaller chances of having issues with your device that require you to replace it after a couple of months. Since you are investing in a new, performant device, you should expect it to last for at least a couple of years. 

You can count on a warranty. 

More often than not, when you buy a phone through a mobile plan, you also have a unique warranty that covers many things that regular warranties don’t. Dropping your phone in water, losing it or scratching the screen can be covered entirely, which means you don’t have to worry about having to pay a large amount of money to fix your phone.

Sure, you can get this kind of extra service with a regular warranty too, but more often than not it would cost you something extra.  

Upgrading easily. 

Many companies allow you to get an upgrade after a year or so; you have to give your phone back and a small difference in money, and you can get a new device. If you are one of those people who always want to have the latest device on the market, this is a great way to save some money in the long term. Paying for a new mobile upfront every single year can be very expensive.

The Cons

Buying services that you don’t need. 

When you sign for a mobile plan, you purchase much more than just the mobile. You are buying a certain amount of internet traffic (data), SMS and minutes for calling. When they come in a package, you don’t often get the chance to choose what you need and what you don’t, and you are forced to pay for advantages that you don’t use, and you wouldn’t purchase usually. 

You may be buying a phone that you don’t need. 

When you pay monthly, you don’t think about the total amount that you have to pay throughout the contract. You can be tempted easily to buy a phone that is more expensive than you would typically choose, and that has features that you would never use.

While it may not seem like a big difference at the moment, in the long term all the unnecessary expenses add up. 

Difficulty in changing your provider. 

Once you sign a contract to buy a mobile phone through a mobile plan, it is complicated to change your provider; you can only do so after you have completely paid the phone off.

This means that even if you become unsatisfied with their service, you still have to wait for quite some time before you can switch to another provider, or you will have to pay the full amount that you owe them for your mobile. 

Too much debt. 

We all start from the assumption that we can afford the monthly payments, but what if something goes wrong? If you miss a few monthly payments, the extra fees will add up, and you might find yourself in the middle of a financial disaster. Are you ready to take this risk? 

The interest can be high with some companies.

 Ideally, you manage to find an offer that works for you. However, many companies have high-interest rates, which means you may end up paying more than what the phone is actually worth. 

Interest-free repayments

Quite often, if you do not select your mobile plan carefully, you can find out that you have to pay interest for your phone- which makes it more expensive in the end compared to what it would be if it were an upfront payment. Besides that, if you have a flexible interest, you won’t even know for sure how much you have to pay every month and if the price will increase or not. The solution? Interest-free repayments. With this type of repayment, you are guaranteed that you won’t pay anything more than the price of the mobile.

You won’t waste excess money, and you will know, every single month, exactly how much you have to pay.  What’s the catch? Interest-free repayments usually ask for more significant payments upfront. Spark and Noel Leeming for example, offer excellent interest-free repayments.  

While paying off your phone monthly may seem like a great idea, there are plenty of issues that you have to take into consideration. Reasons such as making sure that you get a good deal, that you don’t pay more than you should and that you want and need that mobile. Once all this is set in place, you can go and find yourself the best deal with a clear mind.