Before we begin, I'm terribly sorry that this post is massively incoherent, badly formatted and error-ridden, It's very late. I'll try to fix it somewhere next week. You can reasonably skip to "Summary/TLDR" at the end.
My take on this topic is heavily influenced by Polish sci-fi writer going by name Stanisław Lem.
Let me quote what wiki says about, what I consider, the most distinctive feature of his writing style:
Translating his works is difficult due to passages with elaborate word formation, idiomatic wordplay, alien or robotic poetry, and puns.
I do not know initial reasons for his reliance on word formation. Deliberate stylistic choice? Mockery of neologisms permeating communist rhetoric? Times before "invasion" of "standard anglophile sci-fi language", as I would refer to standard modern sci-fi loanwords, which loanwords tend to, in my opinion, constrict and railroad vocabulary, stories and even way of thinking about themes. Being on eastern side of Iron Curtain, would be strong indicator of two latter possibilities, any audience was much more likely to have Russian than English as second language, as well as likely to be familiar with communist rhetoric and their neologisms. However, Lem kept his style throughout entire writing career, and despite his familiarity with western sci-fi, suggesting that it was a deliberate stylistic choice.
Now, before I mention my actual opinion on use of loanwords versus made up words or translations, let me give some examples how Lem used made up words to create new and different meanings.
In his satiric, comedic and parodic works, like "Star Diaries", word creation is used to create absurd or mocking terms. Take "próżniaż" as an example, to native speaker, it's an obvious combination of "próżnia"-"vacuum", "próżniak"-"layabout" and suffix denoting occupation, creating mocking, yet instantly recognisable in context of space travel, name for astronaut or cosmonaut. "Tubylec" means "native" or "local inhabitant", literally "someone being/living here (implying that you, the speaker is alien in this place)", leading to obvious neologism of "tambylec" for "someone who lives there (not where you are right now)" or Lem's "tuziemiec"-"someone living on this earth/planet (where you are even more alien - from another planet, making observation that aliens might call their homeworld some equivalent of Earth)". Those constructed words have benefit of being new, fresh, creative, instantly recognisable, organic yet mocking. I can't fail to mention "bezrobot", which combines "bezrobotny"-"unemployed" with "robot"-"robot" (same, "robot" comes from Slavic languages, meaning "work", popularised by Czech author) to have new and unexpected word for unemployed robot, instantly making us wonder why was that robot not disassembled yet, why was it built in the first place or how bad is economy if even robots are unemployed?
"Fables for Robots" is a collection of fairy tales that robot parents might tell their robot children to warn them of dangers like, say, robocidal humans. This collection of short stories is inspired by classic fairy tales, very classic, those with copious amounts of death and rare happy endings. "Elektrycerz" is a clear combination of "Elektryczny"-"Electric" (electric is of itself a loanword, albeit pre-dating XX century) and "Rycerz"-"Knight", "Electric Knight" if you will, but in one nice sounding and archaic sounding word. Names of characters in collection combine scientific terms with typical name patterns, "Mikromił" combines "mikro"-"micro" with suffix "-mił" typical for pre-christian Slavic names, denoting "loving something" or "loved by something" ("Bogumił", relatively common name literally means "loved by god/gods"), "Automateusz" combines "auto" like in "automatyczny"-"automatic" with "Mateusz" Polish version of "Matthew". "Wasza Wysokość"-"Your Highness" becomes "Wasza Ferromagnetyczność"-"Your Ferromagneticness". Scientific terms, especially Polonised version of scientific terms, are combined with archaic sounding words or early modern terms and concepts to create flavour of fairy tale. Alternatively, one tale about human captured by robots calls back to actual XIX debate in scientific community, namely what should Polish name of oxygen be. "Tlen"-"Smolderer"-"one that causes/enables smoldering" was selected over "kwasoród"-"acid birther/progenitor"-literal translation of Latin "oxygen", and Lem accentuates fear robots feel by using "kwasoród". In Fables, humans are Nostromo's Alien (decades before Alien, mind you), their blood makes acid! Acid dissolves metal! RUN!
"gwiazdolot"-"star flier" used in both serious and comedic works is a real early XX century word for spaceship, created in obvious parallel to "samolot"-"self-flier" or "autonomic-flier"-"plane" and "samochód"-"self-walker" or "autonomic-walker"-"car" something that goes on it's own, without animal to pull it, horseless carriage if you will. In similar way, "Promieniomiot"-"Ray-thrower"-"Ray gun" combines archaic term for hand gun "kulomiot"-"bullet thrower" (other Slavic languages, like Russian, still use this word for some types of guns) with "promień"-"ray" to have something with same feel as "raygun" while being distinctively organic - it's a word one could perceive as one that emerged naturally. "Zmartwychwstalnia"-"Ressurectory" is a place where people are woken up from cryosleep, but even more naturally could mean place where people are cloned back to life, or reuploaded from backup, depending on in-universe lore. "Odmrożeniec" combines "odmrożenie"-"frostbie" with suffix meaning person who had something happen to them, creating a word which could in every day use mean someone who suffered frostbite, but in world with cryosleep could easily take on meaning of someone freshly awoken from such cold sleep.
Case of professional translations: Dune
As another famous, in Poland, example, I'd like to mention translation of Frank Herbert's Dune. There are two main translations, one by (MM) Marek Marszał and one by (JŁ) Jerzy Łoziński. Selection from Polish wiki:
- (Fremen) (Fremeni) ("Wolanie"-"free-ones")
- (suspensor) ("dryf"-"drift") ("odciążacz"-obvious opposite to "obciążnik"-"weight")
- (sandworm) ("czerw pustyni"-"sand maggot") ("piaskal"-"sand being")
- (stillsuit) ("filtrak"- combination of "filtr"-"filter" and "frak"-"dress suit") ("hermetyk"-something hermetic or someone hermetic in his beliefs)
- (lasgun) ("rusznica laserowa"-"laser matchlock", "rusznica" is an archaic name for firearm) ("laserobin"- combination of "karabin"-"rifle" (yes, rifle, not carbine, carbine is "karabinek"- diminutive form of "karabin") and laser)
It's clear that those translations have different feel. Łoziński's translations are more organic (with exception of his term for stillsuit), while Marszał's translations attempt to be more faithful (his term for lasgun tries to capture how archaic "rayguns" are in times where it's more common to have pulse/laser/phase/whatever rifles). "Wolanie" could mean "free ones" or "ones who have will/free will", which considering that in Polish language Germans are called "Niemcy"-"mute ones" is much more natural. Why "mute ones"? Millennia ago all other people nearby used similar sounding Slavic languages, "Słowianie"-"Slavs" comes from Slavic "those who can use words" or "those who speak", meanwhile, Germanic tribes spoke some strange gibberish completely unlike any human language, hence mute ones. "Fremeni" is merely Polonised foreign word, no different from "Apacze"-"Apache", faithful in pronunciation but completely devoid of meaning (apparently "Apache" is derived from Apache word for "people") and decidedly not one created naturally in Polish. Don't fall into trap of thinking that it's "primitive" naming convention, French call themselves "the free people" after medieval Latin for "free, non servile", "English" when pertaining to people means "fish hook people", after shape of Jutland from where Germanic tribe which conquered isles comes, "Polish" is "people of the fields" after founding tribe and Germans call themselves just "the people", note that in some languages origin might be lost, in some, like Polish and French, it is still recognisable. "Odciążacz" makes use of prefix "od-" meaning opposite, and replaced prefix "ob-" in "obciążnik"-"additional weight or something weighting down". In same way, "filtrak" is more natural sounding and as such, is rather uncharacteristic of Marszał's translation. Łoziński tries to rewrite into Polish, while Marszał tries to translate. Is one of those better than the others? Depends. I prefer Łoziński's version, but that's me, besides, you know famous saying about translations, don't you?
Official naming conventions
At the same time, you can invoke official naming conventions of your language. For example, "marines" are "piechota morska"-"sea infantry" in Polish military parlance, remember that "marine" means "pertaining to the sea" making "space marines" an oxymoron. Common translation "kosmiczni marines" is both unimaginative loanword AND oxymoron whereas substituting sea for space in Polish term creates "piechota kosmiczna"-"space infantry", something consistent with military naming convention and easily recognisable yet distinct from "space marines" running around in space operas.
Now, with those examples spelled out, I would like to state what I think: seriously consider making up words. It's an entire new dimension to vastly change look, feel and style of your story. Combine new and old, use feelings invoked by words, use associations to convey meanings. Use loanwords to make character appear pretentious by overusing them, or use them to make topic seem detached, technical and rigid (disclaimer, might not work so well in your language, especially if you are writing in Romance language). If you are not writing in English, it's foolish to discard specifics of your language and myriad of tools it has just because English is more common. Granted, making proper use of neologisms requires really good knowledge of your language, beyond that of most authors, but opens unparalleled possibilities, unique to your language (might be a hindrance if you want to go international, though). Research etymology of words and make up words in similar pattern for more natural and organic feel, use direct translation when you want to convey that concept itself is imported, use loanwords when they serve your purpose. Treat making up, translating or not as another tool in your toolbox. Those are tools, just like tropes.
And remember that I could be wrong, perhaps in your language loanwords are not as alien as they are in mine?