Overcollaterization and multi-sig. For example on HodlHodl you can lend USDC where the borrow posts more collateral than the loan. The lender, borrower, and HodlHodl each own one key in a 2-of-3 multi-sig. If there's a dispute then HodlHodl will resolve it.

I believe he might be referring to flash loans, essentially the borrowed money is returned to you within the same transaction that borrowed it + interest.

I don't agree with calling flash loans loans. Money isn't borrowed, as you don't posses them even for a second. Instead it's more like "offer me an atomic transaction that will make me money, and I will run it with my liquidity". See: i'm not giving you my liquidity, i merely choose to use your strategy which is atomic, and you cannot change your mind and steal the money halfway (as in borrowing).