The sky is the limit in terms of innovations possible, it's literally some code running on the global computer that is Ethereum.
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.
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.