GiffGaff starts flogging phones, with flexible P2P financing

The DIY mobile network is now selling a range of 20 phones -- and you can borrow from other GiffGaffers to pay for them.

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Nick manages CNET's advice copy desk from Springfield, Virginia. He's worked at CNET since 2005.
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GiffGaff, the super-cheap do-it-yourself phone network run by its members, is offering a new way of buying new blowers. The mobile network is now selling a range of 20 phones -- and you can borrow from other GiffGaffers to pay for them.

Its mobiles go from the old-fashioned £71 Nokia 301 to the super-powered £599 Samsung Galaxy Note 3, with Android dominating, although there are several Nokia Lumia Windows Phones and a BlackBerry thrown in. The iPhone is conspicuously absent.

The prices are nothing special, and you can certainly get many of them cheaper -- you'll find the Note 3, HTC One and Galaxy S4 for more than £100 less online. As usual, paying for the phone upfront is much less costly than finding a monthly deal.

The main attraction is the flexible financing. Paying for the phone is completely separate to paying for minutes or data in one of GiffGaff's goodybags -- like O2's Refresh system -- so it's easier to tell what you're shelling out for. All the phones are unlocked, which means you can move to a cheaper service deal elsewhere but keep paying GiffGaff for just the device.

Choose your own rate

You can also customise exactly how much you want to pay up front, and how much you're willing to borrow. Let's say I want a shiny new Nokia Lumia 520. I can splash out £127 right now, or just £50 up front and stagger the rest over 6, 12, 18 or 24 months.

The longer the deal, the lower the interest rate you pay, and the website shows exactly how much you're paying in total and per month. In my case, I can pay £13.71 per month for six months (at a rate of 25.7 per cent APR), or £3.53 for 24 months (9.8 per cent APR), for example.

Again, there are better deals elsewhere. You can find credit cards with lower APRs -- MoneySupermarket highlights this 7.8 per cent Sainsbury's card. Depending on your credit rating, you may not qualify for that card, however, whereas you may for GiffGaff's financing.

The loans come from RateSetter, an online finance company that gets borrowers and savers together, with no bank in the middle. "For the financing we're blazing a trail with something called peer to peer lending," GiffGaff explains. "It's where a clever online system matches people with a bit of money to spare with someone who wants some cash to buy a handset. There's no bank as a middleman which means the financing costs are low."

RateSetter sets GiffGaff's APRs and does a 'soft' credit check, which doesn't affect your credit. You have to be over 18 to apply.

"It's certainly a significant move, particularly for those consumers that are unable to pay for the upfront cost in one go -- and the selection of devices on offer from giffgaff is decent," says Ernest Doku, telecoms expert at uSwitch.com. "However, most of the handset costs can be bested by the likes of Amazon or eBay. So while affordable financing might see savvy consumers able to make savings, the pricings are some way off for now."

What do you make of GiffGaff's deals? Do you think this kind of super-customised financing is the way everyone will buy their phone in the future? Is it good to separate the service from the device, or would you rather it was all just one payment? Let me know in the comments, or on our self-financing Facebook page.