Borrow 1 BTC, and pay back 1.1BTC can work over any time.
Where is that 0.1 BTC coming from?
In the fiat world, the way to make this happen is issue more and more money to pay back the previous interest, but in bitcoin world, the total number of money supply is fixed, paying back more than you borrowed simply means that interest must come from someone else's pocket
Interest is a perfectly valid way of making money with a currency!
The 0.1btc comes from the person who borrowed it, just like in the old days of banking!
Even in the old days of banking, where money is backed by gold, total amount of gold is not limited, so you can dig out some gold each year to pay the interest
In fiat system, added money supply simply means added debt, and added debt will have to be paid back later, together with their interest, it is a snowball effect