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thank you for tuning into more construction loan videos by CCS in this video we thought we should talk about the general parameters of a construction look a construction loan is a short-term loan that is used to pay for the construction of a project in our case a residential house it can be used for additions remodels or new home construction on these projects since the final collateral has not been built yet the proceeds from the construction loan are dispersed gradually as the home is built basically the construction loan acts as a big line of credit before the project starts there is a zero balance but as the lot is acquired the foundation is dug in Ford and as work commences money is dispersed from the loan to the subs and suppliers to pay for the work as more work is done the balance of the loan climbs when all the work is done and all the bills are paid the final balance will get paid off for your long-term loan interest on a construction project loan it also works just like a li