How to make a song in your music library your ringtone?

Use GarageBand.

Yes, if you have GarageBand, Transfer the songs from Files app to GarageBand then --> GarageBand: Share songs to iTunes - Apple Support or Import a song from the Music app into GarageBand for iPhone ...

Here you have the process!

My GarageBand opens my iCloud Drive. In your case it may not be so. Nevertheless the process remains the same. This helps because accidentally if you open up the iCloud Drive using GarageBand you can get back to GarageBand.

Music bust be on your iPhone not on iCloud Library.

When you select the song Hold and tap the Song delicately for it to populate it in Audio Recorder.

Watch the GIF below to convert any music to RingTone

This is made on iOS 13.3.1 iPhone SE

You can't use copyright protected music as a ringtone without paying.