New Mobile Phone Contract seems to be a 'loan'

J24

I've just got off the phone with Vodafone, as wanted to upgrade my phone and get a better deal. the Handler was great and we agreed on a phone and deal. however, as we continued through the process, it started to feel wrong.
The Handler kept saying 'loan', a 'loan' for the phone, and 'loan' for the mobile deal. 
When I hung up, it's sinking in and I don't feel comfortable with this. I was looking at Monthly plans, and want a service agreement, not a loan with a phone company.
It feels like Vodafone want this sort of deal as it's harder to get out of a loan agreement than a service agreement.
Has anyone else found this with or without Vodafone?

la531983

The language doesnt really matter. Its still a fixed term you have to stick to (early termination charges will likely apply), and its still reported to credit reference agencies.

Timalay

It could be that the sim and phone might be two different contracts.  You normally see it on phone plans over 24 months.  It's a way they get past the normal 24-month max limit.  Your sim contract will be on a 24-month agreement, and your phone will be on however long you agree to it. 

WelshPaul

Vodafone's EVO contracts are made up of two parts:

1. Service Agreement (plan)
2. Loan (device)

What Vodafone won't tell you is that the loan will have a huge negative impact on your overall credit rating. No different than going to the bank and borrowing 10k or visiting a car dealer and obtaining a loan to pay for a new car. I would seriously avoid mobile phone contracts that provide hardware through loans.

It's also worth mentioning that because you're applying for a loan, both new applicants as well as existing ones who simply want to upgrade must go through a "hard" credit check which also has a negative impact on your credit worthiness.

MorningcoffeeIV

WelshPaul said:

 the loan will have a huge negative impact on your overall credit rating.

But no one will ever see the credit rating, so it's fine. 

Lenders are used to seeing utility contracts.  The fake credit rating is irrelevant.

WelshPaul

I'm not talking about those silly little numbers the credit reference agency show you!

PHK

WelshPaul said:

I'm not talking about those silly little numbers the credit reference agency show you!

What are you referring to?

WelshPaul

Every lender rates your credit worthiness based on their own criteria.

A loan can affect your credit score in a number of ways⁠—both good and bad. Taking out a loan isn't bad for your credit score in and of itself. However, it may affect your overall score for the short term and make it more difficult for you to obtain additional credit before that new loan is paid back.

PHK

Credit scoring and a credit score are different things. 

Any lender will assess whether they wish to lend to you based on a variety of factors, amount involved, disposable income when other commitments, whether you are regularly paying the loan/credit.

I would argue that something like an equipment/utility loan is a good way of establishing a credit record. The amount to involved are small and so are unlikely to reduce the amount another lender will offer but the payment will show good credit management.

km1500

If possible you could consider buying the handset separately on eg a 0% purchase card and get a sim only airtime contract from vodafone

Timalay

It's a sneaky was for them to get past the maximum 24-month contract agreement, by splitting the phone from the contract and having it as a finance agreement instead, whilst the contract itself is rolling.