From Tim Mittelstaedt, editor-in-chief, Palm Beach Research Group: What if there were a better, easier, smoother way to borrow money than going to a bank or using your car as collateral?

Dividend-paying whole life insurance policies—which we at the PBRG call “Income for Life”—come with guaranteed loan provisions. This means that the insurance company has a legal obligation to lend you money… whenever you want.

You won’t be asked questions. And you won’t go through a loan application process.

The catch is that you can borrow only up to the amount you’ve saved in your Income for Life policy (that’s known as the “cash value”). For example, if you have $20,000 in cash value, you can get a loan from the insurance company for up to $20,000.

So what are the advantages of borrowing money from a mutual insurance company over a traditional bank? There are many. But today, I want to tell you about four of them.

Advantage #1—Guaranteed Loans

If you have $20,000 saved in your Income for Life policy, you can borrow $20,000 from the mutual insurance company—no questions asked. The insurance company can’t refuse your request for a loan. As part owner of the mutual insurance company, you’re given this perk with your policy.

When you apply for a loan from a traditional bank, there are no guarantees. You are at the mercy of its ever-shifting rules and the changing economic environment.

This happened during the financial crisis of 2008-2009, when thousands of struggling business owners were denied access to new money and lines of credit.

Advantage #2—No Applications or Credit Checks

When I started a home renovation project years ago, I originally planned to get a traditional loan from my bank. Instead, I picked up the phone and told the customer service representative at my life insurance company that I wanted to take out a policy loan (I knew my policy had enough cash for this project). She asked for my policy number and how much I wanted.

A couple minutes later she told me, “You’ll get a check in three business days.” Sure enough, it showed up in my mailbox at the end of the week.

If I had taken out this loan from a traditional bank, it likely would have taken several hours to fill out the paperwork and gather all of the documentation for the loan officer. Then I’d have to wait another week for the papers to shuffle around to each person involved before I got the money.

Advantage #3—Setting Your Own Terms

With a loan from a mutual insurance company against your policy, you’re in full control. You set the terms of repayment.

The insurance company will charge you a minimum amount of interest for the loan. Right now, rates are between 4.5% and 5%. Some mutual companies charge higher rates—up to 8%.

If you want to extend or change the payback schedule on your loan, you can do that.

Once you’ve funded your policy long enough, you also have the option to not pay back the loan… unless you want to.

You see, the company knows you’re going to die someday. And when you do, they will just pay off the loan and accrued interest with the proceeds from your family’s death benefit check.

Advantage #4—Flexibility

If you have a car loan from a bank and you miss payments, your credit score will take a hit. If you miss enough payments, your bank will have the car repossessed.

It’s the same thing with a mortgage. Your credit score takes a hit, you’ll start getting letters from the bank and, eventually, the bank will foreclose on your home.

With a loan from your mutual insurance company, you have flexibility for life’s unknowns.

If you need a break from loan payments because you lost your job or had a large, unexpected expense, you won’t have to worry about damaging your credit score… or the bank repossessing your car.

Of course, it’s not a good habit to get into missing payments. But it sure is a nice option to have if you need it.

In short, the policy loan feature that comes with Income for Life policies offers a powerful, unique, and unmatched alternative to the traditional financing process with banks.