What are the consequences of defaulting on a carryback loan?

When you default on a carryback loan, the consequences will largely depend on the terms of the loan. Since carryback loans come from non-traditional lenders, they often do not get reported to credit agencies. If this is the case, you may escape some of the burden of carrying a default on your record. On the flip side, since you are working with a small financier, the chance that that financier will attempt to collect on your default is high. The lender will likely file a case in court to at least partly recover whenever a borrower defaults on a carryback loan. The property will also enter foreclosure.