What is the difference between a construction loan and a traditional loan?

A construction loan and a traditional loan are two different types of loans. A traditional loan is one that is taken out to purchase something, such as a house, car, or equipment. The borrower pays back the loan in regular installments, usually with interest. A construction loan is a short-term loan that is used to finance the materials and labor necessary to build a structure, such as a house or commercial building. Construction loans are usually taken out for a specific period of time, such as 18 months, and are paid back in installments throughout the construction process. The primary difference between a construction loan and a traditional loan is that a construction loan is secured by the building or structure being built. This means that if the borrower defaults on the loan, the lender can take possession of the building or structure and use it as security for the loan. A traditional loan, on the other hand, is unsecured, meaning that the lender cannot take possession of the collateral in the event of default. In Washington, the rules for both traditional and construction loans are regulated by state laws. It is important to understand the laws that apply to both types of loans so you can be sure that your loan is being handled appropriately.

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What is the difference between a construction loan and a traditional loan?

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