While rumors about the release date of iPhone 5 are still coming fast and furious, a new report from BGR suggests Apple will launch a low cost pre-paid iPhone this year.

The handset will cost no more than $350 without contract, and possibly will be the iPhone 3GS.

Apple had earlier announced that it is trying to extend its iPhone offerings by working on low-end devices.

However, there is no indication that Apple looks to discontinue the current iPhone, the iPhone4, although it’s unclear what role the iPhone 4 will play in a three-tier product line. But the consensus is that it will be a mid-range phone priced somewhere between the 3GS and the next-generation iPhone, whether it’s sold as the 4S or 5.

Whether it’s the iPhone 4S or iPhone 5, the report said, the next generation iPhone will be announced by the end of summer.