That's a valid question and the reason is that people offer collaterals in the form of altcoins like ethereum, litecoin and we know how volatile crypto can be, so for example, if there is a bull run then the price of the alt coins will give one great returns because of lower prices, like if you have invested in a coin of $0.01 and if it goes to 0.03$, voila you get 3x profits, so why would you want to sell alt coins for meeting your emergency need and lose potential profit? That's the reason of alt-coin collateral, so your alt coins are also safe and you can have future profits as well as you meet your demand of urgent need using a loan.