Bitcoin backed loans are terrible though - A lot of people where doing this strategy 2021-2022 and most of them got rekt on it.

You need to have the loan be overcollateralized. I.E the Bitcoin needs to be worth 2x the dollar amount or some margin of safety like that.

When the Bitcoin price drops, which it will sometimes do, your custodian will margin call you. That is they will ask you for more BTC to post as collateral, within a short span of time.

If you don't have more collateral AND you are looking at your phone AND you can send it to them within a few hours, they will liquidate the collateral. That means market selling your Bitcoin at the bottom.

Also, you will need to give up custody of your Bitcoin in order to borrow against them, so that the custodian can liquidate you. This also exposes you to all the typical risks of custodians: Fractional reserve, rehypothecation, fraud et cetera.

Just selling your Bitcoin for cash if you need to for major spending is much safer.