Oh, it’s so much weirder than that. When you take a loan, the bank just creates the money based on a percentage of their deposits. Then, they can count that deposit as part of their “real” money. They now have a debt, which does not count against their “real” money
They can then package the loans together, and sell those. This is again “real” money, so can be deposited and used to give out more loans.
But wait! You’re probably thinking “that’s way too simple, let’s run statistics on this!” You’d be right, welcome to the first layer of modern banking.
What happens if a bunch of people can’t repay? Then the bank hides whatever money they can before admitting they can’t make their payments, collapses, and a federal banking system takes over to repackage the assets and loans to another bank (usually without the customers noticing). Or the government writes you a bailout check.
You might think “wait, my constitution says who can print money, why do we have to take loans?” Because they haven’t declassified what happened to the last US president who thought private banks probably shouldn’t be given the monopoly to print money.
What happens if this happens all at once? Well that’s the government’s problem. They can devalue their currency by printing more money or take a loan from the world bank.
Then, you get a bank official that gets to take over your country’s finances. Depending how much the US likes you and how hard you bend over, either you get austerity and they sell off your economic future for a bit more cash now, and you get milked for tax dollars indefinitely, or they cut you a deal, and they give you a way out eventually if you do everything they say.
You might think you could just let the banks fail, but no. That’s how you get an injection of freedom.
You might think about pinning the printing of money to exchange rates or to tax income and managing the banking system socially (since the risk is socialized, why let someone take the profits?), but no. That’s how you get an injection of freedom, comrade.
You should probably stop thinking about other systems before you look a little low on freedom, this is how banking and money work.