Growing black portion on the screen of 2017 MacBook Pro. What could be the cause?

I bought my MBP 13" 2017 (without TouchBar) in late 2018. So far, so good, but after I started using it by plugging in an LG 23" monitor (as a second display), a black pixel stripe started showing up at the bottom of the screen on the MBP Retina display (even with when unplugged to the LG monitor) and its grown larger ever since. The Mac is out of warranty, so the only way would be to replace the entire screen assembly. Would this solve this issue? I'm guessing that using a MBP that doesn't have a graphics card with a second monitor is not a good idea...

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That definitely looks like a screen (LCD) issue. Whether it's on the MacBook or it's the LG, the screen is damaged and must be replaced. However, I'm assuming it's the screen on your Mac...

The Mac is out of warranty, so the only way would be to replace the entire screen assembly.

Yes. You would be correct; the only way would be to replace the screen assembly.

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I'm guessing that using a MBP that doesn't have a graphics card with a second monitor is not a good idea

Connecting an external monitor to a laptop (not limited to Macs as PCs use the same Intel processors) that has a port specifically to do that wouldn't cause any damage whatsoever to your laptop.

Damage happens and it could be from any number of reasons - a manufacturing defect to physical impact with something. But most definitely, it's not because you connected an external LCD to your Mac.