Firstly, a loan can't be agreed by the EC – only by the Owners Corporation at a general meeting. Because there may be some people better able to pay than others, it's only fair that a majority of all owners decide on whether to impose a special levy or arrange for a loan through a specialist strata loan company. Strata loan interest rates are higher because the loans are “unsecured” – you can't offer any property as a surety. However, strata lenders will argue that the cost to borrowers is no greater, at the end of the day, than a bank loan or, indeed, spending your savings (and losing accrued interest).
And to answer your other questions, the loan is raised by the Owners Corporation and is serviced via an additional amount added to the levies, based on unit entitlements. The two leading companies in this field are Lannocks and Strata Finance although there may be others.
The difference, at the end of the day is philosophical as well as financial. Do you want the people who will benefit from the work (present and future owners) to pay for it or do you think current owners should pay for not having enough in the sinking fund to cover the cost of remedial work?
Many owners prefer to pay up front for the simple reason that a loan adds to future levies and may put future purchasers off (or they may be happy to see that necessary work had been done). Other owners simply don't have the money and might face having to sell up if they are forced to pay a special levy (although there's a body of opinion that that's what you get for 'saving' money by not keeping your sinking fund up to scratch).
You could go for an each-way bet. Get the special levy in to get work going and then look at a loan for the balance of the work if it's going to mean another hefty hit. But you are right to ask about this – the most important thing is that everyone gets to make an informed choice.