New iPhone 7 interest-free deal is far cheaper than mobile network contracts

While a new iPhone is never MoneySaving, the new 'iPhone Payments' scheme is a huge boon for those who'll buy one anyway after it hits stores on Friday, as buying the handset and pairing it with a cheap Sim can massively undercut locking into a long-term contract with a mobile network.

iPhone Payments is not the same as the more publicised (and more expensive) iPhone Upgrade Programme, which lets you upgrade to the latest model every year and bundles in Apple's iPhone insurance, AppleCare+.

Apple isn't shouting about the deal – it doesn't even have its own dedicated page on the Apple website currently. But it could prove a game changer for the UK mobile market.

The major mobile providers began revealing their iPhone 7 deals this week, but in many cases they cost £100s more over the lifetime of the contract.

How iPhone Payments works

iPhone Payments is a financing scheme specifically for the iPhone 7 and 7 Plus. Unlike a traditional mobile contract it doesn't include a Sim or an allowance, so you'll just get the unlocked handset and then need to pair it with a separate Sim-only deal.

You'll be credit-checked and will need to be accepted for what's technically an interest-free loan, though. Here's what it costs:

iPhone payment plans

To get iPhone Payments:

1. Reserve the model you want – you can ONLY get iPhone Payments in store. To collect an iPhone 7 in store, you can reserve it online, though currently Apple isn't accepting new reservations. (It says it'll be taking them from 6am on Saturday 17 Sep.) Update Thursday 15 September: We've also been told that limited stock (of all colours except Jet Black) will be available in stores on a first come, first served basis from Friday.

2. When you collect the phone, say you want to pay via iPhone Payments. You'll need to bring bank details, a valid photo ID and your current mobile plus other personal info – see Apple's website for a full list. You'll need to be a UK resident aged 18+, have a UK bank account and have lived in the UK for 3+ years.

3. If accepted (you should be told within five minutes), you'll pay £49 upfront and the rest in 20 monthly instalments. Your loan will be with Barclays, the finance provider behind the scheme, at 0% APR. Monthly repayments are made by direct debit. If you don't keep up with them, Barclays would take the same action as any other loan provider – it could result in a mark on your credit file, for example.

New iPhone 7 interest-free deal is far cheaper than mobile network contracts

How the networks' tariffs compare

The big mobile networks have now released their prices for the iPhone 7 and iPhone 7 Plus – and to see how they stack up against iPhone Payments, we've taken a look at a few iPhone 7 (32GB) tariffs.

We've used Three's 'Essential' £9/month* unlimited minutes/texts and 4GB tariff as a benchmark (it should roll on after the 12-month contract ends), as that's sufficient for many users. We compared it with similar network deals – though most aren't offering 4GB tariffs on the iPhone 7, so where there's no direct equivalent we've chosen the closest available.

We also compared it with getting the device from Unshackled.com, which offers mobile financing (partnered with Zopa) at an APR based on your own credit score (we used its representative APR of 9.7%) – again pairing with it with the Three Sim.

iPhone 7 (32GB) contracts compared

Bear in mind that these tariffs are with the networks directly, not via contract-reseller sites such as Mobiles.co.uk* (owned by Carphone Warehouse). These sometimes offer cut-throat tariffs that beat even buying the phone yourself, but this is unusual following the release of a new model and we didn't find any that undercut Apple's offer while researching this article.

It's worth keeping an eye on tariffs using a comparison site such as MobilePhoneChecker* (which also covers resellers), to see if this changes in the coming months though.