A construction loan is a type of loan that is used to finance the construction of a new building or the renovation of an existing building (not to be confused with a renovation loan which is usually for the interior of a house/apartment). Construction loans are typically short-term loans that are used to cover the cost of the materials, labour, and other expenses associated with construction.
Some construction loans are disbursed in a series of instalments, depending on the progress of the construction, while others loans are typically disbursed in a lump sum.