People need loans (bank loans atm) to live. To buy a car, a house, school, etc. Our society only works with loans.
So, if bitcoin becomes HUGE, how will the bitcoin loans work?
They can work the same way. Banks gives out small loans based on reputation and larger ones for collateral and if you check out the Lending section it is happening exactly like that. People give/take loans based on user's reputation and larger ones are only allowed if a collateral is provided.
I believe one should not even consider in making a bitcoin related loan if the source of one's income isn't denominated in bitcoin aswell.
Mainly because there could be problems with loan repayment if the value of bitcoin increases during the duration of loan itself, on the other hand; if price would go under; it would
be good for loan taker, but that's a gamble, and as a loan taker you can't afford to gamble.
So use bitcoin loans only if you get income in bitcoins, and for every other case denominate the loan in fiat.
True but Bitcoin is not so volatile atm but these are risks involved with Bitcoin loans and both the parties should be aware of these prior to taking/giving any loans.