I mean its collateral right? So only if you default on the loan the coin would be lost and they would choose to either hold or liquidate that coin. I mean you could see a huge drop in price where your loan > crypto collateral and you rather keep the money but the credit hit would be terrible.
Risk-management appears to be the biggest challenge here. Apart from hedging via shorts as mentioned by 1Referee, I assume that for the most part they'll either charge rather high interest rates as mentioned by clrpod (think subprime loans and junk bonds) or require a rather high amount of collateral as mentioned by davis196.
I think two aspects are quite interesting in this regard:
1) If, as a lender, you only work with crypto as collateral you're highly exposed. Banks can at least spread their risk by making use of a wide selection of asset classes with little market correlation and of varying volatility. Obviously didn't work out so well during the housing crisis but that was mostly due to banks being overexposed to a single asset class (ie. real estate). Would be interesting to know how Ledn plans to manage its exposure to crypto (if at all, maybe they are simply all-in).
2) Assuming that at one point using crypto as collateral becomes widespread, meaning not only Bitcoin but also alt coins, we're likely to see some sort of rating system for cryptos, similar to the credit ratings for businesses and governments. For better or worse.
Definitely, I'm guessing this is where stable coins would really shine, your geminicoin, tether and whomever else has one. It does make a nice scenario, throw btc into stable coin, get loan, get stable coin back, convert back to Bitcoin. No tax.