There are benefits and drawbacks to construction loans. These types of loans tend to have higher interest rates than those associated with a mortgage, for instance. In addition, the funds provided by a construction loan are only released in stages as work on your home progresses rather than in a lump sum upfront. However, construction loans often only require interest payments while your home is being built, which can be easier on your budget. The loan terms may also be more flexible than those that come with a traditional loan.