Construction loans fund ground-up building projects and are disbursed in draws as construction milestones are reached. Lenders require detailed plans, budgets, contractor credentials, and often a construction-to-permanent conversion plan. Interest is typically charged only on the disbursed amount, keeping early-stage costs lower. For investors, construction loans offer the opportunity to build exactly what the market demands, but they require careful project management and contingency planning to avoid cost overruns that could jeopardize the financing.