When it comes to borrowing and loaning money you need to put your thinking cap on. It is not as simple as it seems. We see repeated statements in Proverbs that borrowing is bad news. That is a simple truth but there are times when people have their backs against the wall and have no choice. That applies to this verse because the simple minded fool being talked about here borrows when he doesn’t have to. He does not know the difference between want and need. In that situation, take his coat in payment.
In cases of genuine need the rule is different.
(Exo 22:26 KJV) If thou at all take thy neighbour's raiment to pledge, thou shalt deliver it unto him by that the sun goeth down:The context here is a genuinely poor person in desperate need. In fact the previous verse tells you that in situations like that you can’t charge interest.
(Exo 22:25 KJV) If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury.So? If you are the one needing money, make sure it is a need and there are no other avenues. If you are the one with a little extra, discernment is also required. Either don’t loan because the “need” is imagined or loan with no interest and no foreclosure. It demands responsibility on both sides. It is called being upright, both for the poor and the wealthy.