ChartEX founder wrote a nice piece here about flash loans on DeFi:
Clever arbitrageurs, for example, borrow money and pay it back immediately, taking advantage of incredibly short term price fluctuations in the process. These arbitrageurs take out loans on underpriced markets, and then profit quickly by selling high on another market, repaying the loan, and pocketing the profit. This can be done within a single on-chain transaction through decentralised exchanges. Arbitrageurs might code the steps into a single smart contract.
https://www.valuewalk.com/2020/12/flash-loans-defi/