There is a difficulty setting that keeps the loan from being cleared out just because you became the Mayor. If that's active, you need to pay it off.
However, even with that setting, trying to pay off the loan before advancing the plot is not the best idea, because available resources are story locked (unless you turned that off), so you can't get and make the primo shit that sells for big bucks unless you advance the story anyway.
As for sex work's payout, yeah, it's pretty shit. I think it could use some boosting, but as it is right now, the major benefits are "it's set and forget; no need to interact with it once you assign a worker" and "there is no limit to the number of hookers you can use." But not having a hard cap on how many people can do it is only of limited utility, since you probably don't have enough people to go around for a while yet, so renting out your spares as toys isn't that useful.
There's consumables you can use to boost their take, but that requires having someone producing it in the farm, and by the time you get the relevant farm stuff set up for bonuses on your hookers, you'd probably have been better off handing them a pick and sending them to the mines anyway.