Before you start with the morality of the situation, just ignore that. You wanted to see a real use case, and I am telling you about it.
As it turns out, not everyone shares your moral code, or lives in the similar legal system which allows them the similar property rights.
Replace that person with a Venezuelan whose currency is completely destroyed and Venezuelan Americans are trying to provide their families with money.
The sky is the limit in terms of innovations possible, it's literally some code running on the global computer that is Ethereum.
So you're right, this isn't a thing that exists today outside of crypto because it's not needed outside of crypto. Someone who can pay a loan back as part of the same transaction in which the loan is issued is not a default risk, and in the real world you just don't bother with the loan: you just pay for the underlying transaction directly.
You might say "why the hell would I do that?", in order of importance: 1) you hold on to your asset's appreciation, 2) access the liquidity, 3) avoid capital gains tax.