I think your confusing the properties of magically creating money with that of fractional reserves.
Fractional reserve is related, but different to what I'm talking about. Let's say a bank gets a deposit of $100. They keep 10% of it, $10, as a reserve, and loan out $90. That $90 is deposited by another customer. They keep 10% of it, $9, and loan out $81. That $81 is deposited by another customer. They keep 10% of it... and so on. Take that to its limit, and that $100 deposit will end up funding $1000 of new loans, creating $900 out of thin air as I previously described.
Here's another article, from the Bank of England this time:
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf?la=en&hash=9A8788FD44A62D8BB927123544205CE476E01654Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrowers bank account, thereby creating new money.
And let's say after the bank has created this free 100$ out of thin air, I decide with that 100$ to come back and pay my debt in full. What happens to the money?
The bank erases your debt, takes back the money and everything is just as before you asked for a loan.
This is true, but not everyone pays off their debt. In the US, for example, consumer debt is now over $4 trillion, and increasing. Include mortgages in that figure, and household debt is over $13 trillion, and increasing.
People often get angry about government's printing new money to pay their debts or increase spending or whatever. The stats suggest governments only account for about 3% of the new money entering circulation. The other 97% comes from banks making loans.