When a borrower wants to take out a loan, they have to offer something more valuable than the amount of the loan. That means they need to deposit via a smart contract, an amount of currency that is at least of equal value to the amount they'd like to take out. The collateral can be in a wide variety of currencies, so if you want to borrow one BNB, you’d need to deposit the current price for one BNB in SPARTA.
A few months later, when you’re finished with the loan and pay back your BNB interest, you'll receive your SPARTA back. The borrower is happy because they received their original SPARTA back without having to sell them, and the pool is happy because they can now distribute the interest fee back to the investors.
It's important to bear in mind that the prices can be volatile, especially when dealing with different crypto assets. We’ve all seen the ups and downs of asset prices over time.