Stablecoins can reduce default risk and collection costs in lending protocols. Their price stability, pegged to assets like USD, minimizes volatility, ensuring predictable loan values and repayments. This reduces the risk of borrowers defaulting due to sudden market drops. Smart contracts on blockchain platforms automate loan agreements, enabling transparent, tamper-proof terms and automatic collateral liquidation if defaults occur, lowering enforcement costs. Stablecoins also facilitate faster, cheaper cross-border transactions, streamlining collections. However, risks like smart contract vulnerabilities or regulatory uncertainties remain. Overall, stablecoins enhance efficiency and reduce financial exposure in lending protocols.