I have thought about building a platform that enables lending via smart contract but there will be a lot of things to consider which I haven't been able to do yet, one of it is that what will one use as collateral since the loan will be on the blockchain.

Let's say for example you are giving tokens on exchange as loans, how would you be able to trace the person who collected the loan if they refuse to pay, or will there be a way to reverse the coin back to its original wallet, if so then the purpose of the blockchain have been annulled because the blockchain was built to be decentralized.