In traditional finance, you take out a loan from a bank after posting some collateral. Once the collateral is posted, you receive the principal of the loan and pay it back with interest every month. If you miss payments, they take the collateral through a repossession. In Defi; there is no bank, just a smart contract... So individuals have to post collateral and once they do so, they get to borrow cryptocurrency from other users. Currently, in Defi, all loans are over-collateralised.. meaning that the collateral is worth more than the loan itself. This means that there is no incentive to default on your loan which protects lenders, whilst the immutability of the smart contracts protects the borrowers.