Green’s Dictionary of Slang

loon n.1

also lont, loun
[SE lunatic; ult. Lat. luna, moon; such people are supposedly ‘moonstruck’; however further ety. suggests a link to the aquatic bird the loon, its ‘craziness’ referring to its actions in escaping from danger and its ‘mad’ cries. Note mid-15C+ SE loon, a worthless person, a rogue, an idler]

an insane, unstable individual.