Consider a scenario where someone from not even a year ago took on a BTC loan to buy a new computer valued at $800 USD. Each bitcoin was about 0.4 cents each then, so they would need to borrow 200000 BTC. At a conservative 2% interest rate to offset risk, that's 204000 BTC.
Fast-forward to today and the loan is due. Each BTC is ~$8.50 right now, so the borrower needs to get $1,734,000 of value in order to pay for an $800 computer from last year.
Do you think someone who didn't even have $800 of purchasing power a year ago would have $1.7 million now?
So wait, the only two options with lending are you either pay back or you don't borrow? Have you heard of defaulting yet?