The loan is settled when you take it out. Collateral sold to RUNE... 50% back to you in asset of choice, 50% to the LP of the collateral. Debt/loan accounted for on blockchain.

It is more complicated than I am describing, but this is the simple take. You give me $10 collateral, I give you a $5 loan and keep $5. When you pay me $5 back, I will give you back your $10 (as I will have the $10 you originally gave me). It is that simple... it only gets complicated when assets spike higher than RUNE / RUNE falls harder than asset. TC burned (set aside) 60,000,000 RUNE to safeguard against such events.