Right, which means the loan is actually a USD (or Euro or whatever) loan however you want to spin it. The value of BTC never enters into it; is just payable in BTC. This is not a hedge. A hedge is a position that protects against the risk in another position. A true hedge would be to lend 10 BTC and then go sell short 10 BTC at $X, or more likely to buy an option to sell 10 BTC at $X. Posting a link to the Wikipedia article on hedge doesn't make what you are offering a hedge. (Incidentally, from the very first line of said article: "A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment." There is no companion investment in what you are doing.)
But whether you are offering is properly called a hedge or not is not really important. However, you failed to answer actual question in my post, so I went to the site and did it myself: it appears that the buyer decides payback calculation when they create a loan.
Since there's no USD/Euro/etc involved the loan is in Bitcoin. Perhaps hedge is not the exact word for it, I failed to find a better one, perhaps you can suggest an alternative.
The payback calculation is done by the system based on the exchange rate for the reference currency at the payment moment.
Sounds like nothing more than a calculation provided for the borrowers convince, but actually serves no real purpose. You might look at actually providing a hedge to protect from a rising bitcoin value against fiat for an added fee by buying calls.