This story is brought to you by Savvy.
It's a universal truth: One thing in life you can be certain about is uncertainty. Expect the unexpected, is how the saying goes.
While this past year might have lifted the bar on the scale of unforeseen possibilities that can upend your world, there are immeasurable potential financial doozies that can throw the proverbial banana skin in your path.
It could be an emergency repair for the car you rely on to get to work, a medical or dental bill that needs to be paid, or perhaps your fridge has decided summer is a good time to expire. Maybe you need to travel at short notice. Suddenly you need some cash quickly.
It's around about then that you will notice ads for the many small loan providers around these days that promise fast approval. The money could be in your bank and ready to solve your problem within hours.
So is a small loan a good choice?
While small loans are not inexpensive they can be an option in circumstances when you need a stop-gap solution to urgent cash needs, and don't want to risk incurring the high interest rates of credit cards.
However, there are potential pitfalls you should be aware of before deciding if it's the right solution for you.
What is a small loan?
A small loan is a short-term finance option that allows people to borrow small amounts of money, usually from about $300 to $5000, with a faster approval process than a larger personal loan.
They have a set repayment period that could be anywhere between three to 24 months. Interest rates are usually calculated via a 20 per cent mandatory establishment fee and a monthly fee of four per cent for sums up to $2,000. Other interest rates are presented up front. You are able to clearly see how much you will need to pay each month, how long it will take to pay off, and how much extra it will cost you over the life of the loan.
A small loan offers distinct benefits over using a credit card which can potentially worsen your financial situation because of the accumulative debt if you can't pay off the entire sum at the end of the interest free period. Credit cards have a revolving credit line which means there's no finishing line for the payment of the balance. That can lead to a dangerous credit card spiral.
Small loans are also different to so-called payday loans which usually require the borrower to pay back the loan on their next pay period. This is deducted via direct debit or through your paycheck.
Pitfalls to avoid
Loan expert and Savvy CEO Bill Tsouvalas said small loans can be a handy option in particular circumstances. But he urges people to take care to decide if it's right for their situation.
"If you have an unexpected expense pop up this is a solution to help get you through that crisis if you don't have the cash on hand," he said. "But you don't want to get into a situation where you're using these financiers to just get by for your general living expenses.
"And you definitely don't want to be taking out two or three small loans at the same time. Take out one loan for the unexpected expense and get it paid off."
Another danger to be wary of is applying to multiple lenders at the same time in the hope that one will come through. Mr Tsouvalas warned this could affect your credit history.
Getting the best deal
if you're going to apply for any loan you'll want to shop around. But in the case of a small loan to cover an emergency the appeal is getting cash quickly so you don't want to waste time trawling through websites trying to compare.
One of the fastest and easiest options is using a loan broker. Savvy, for example, provides a streamlined digital service, with direct access to 30 different lenders.
Once you upload your details, your application is assessed in under an hour and lenders respond directly with their offers. Usually funds will be available within a day.
It means you can get on top of your financial emergency as fast as possible - and back in control.
For more information about small loans head to the Savvy website or call 1300 974 066 to speak to their experts.
This story is brought to you by Savvy.