Which type of loan provides periodic installments disbursed in stages?

A construction loan is designed specifically for the financing of a property's construction, which involves periodic disbursements as the work progresses. This type of loan provides funds in stages, often referred to as "draws," typically following specific milestones in the construction process. For example, the lender might release funds after the completion of the foundation, framing, and so on, ensuring that money is available as needed rather than all at once.

This approach helps to manage the risk involved in lending for construction, as the lender can monitor the project's progress and ensure that funds are being used appropriately. As the construction moves forward, the borrower receives the necessary funds to proceed with the project, making this type of funding essential for builders and homeowners undertaking construction projects.

In contrast, a fixed-rate mortgage involves a single lump sum disbursement at closing, which is then paid back in equal installments over the loan term. A reverse mortgage is a type of loan for older homeowners that allows them to convert part of their home equity into cash, which can be given as a lump sum, line of credit, or monthly installments. A home equity line of credit is a revolving line of credit secured by the borrower's home equity, allowing for flexible borrowing but not structured in staged installments