Your example of $100 borrowed dollars and $5 interest is incorrect, it's more complicated than that.
Firstly, that borrowed $100 was spent into the economy. It is then circulating, waiting to be earned back to pay the principle. In the meantime, you're paying the principle plus interest toward your loan. The first $20 principle you pay, $1 is paid in interest. That $1 is then spent by the bank as profit, the $20 is destroyed. There still is $80 in circulation l, not $79, because your $1 returns to circulation. Paying interest does NOT destroy currency, paying principle does. That same $80 continues to circulate in the economy, let's say 10 times, representing exchange of $800 in value, some of which is earned to pay more princiole and interest. In the end, there are zero dollars of the original loan remaining in circulation, but (assuming the cost of the money doesent go up due to scarcity, because there are other banks generating other banknotes) there is sufficient value generation to not only pay off the loan, but also the principle.