How can I use the output sound from GarageBand as my 'mic' for Skype or similar? I run GarageBand on my MacMini with a simple USB audio interface. I want to be able to play my electric guitar through GarageBAnd so the sound with SFX is what is fed into Skype and other video chat sites, as if this were my microphone.

But I think selecting the USB device as my audio input will give me only the dry sound from my instrument, not the modified sound from Garageband?
So how can I do what I want without expensive equipment?

I have realised my USB interface has a mixer inputs/playback which means through headphones I can choose to select only the processed output from GarageBand if I set the interface as my audio-out... but how do I get that back into the Mac short of putting a cable from the headphone-out => Mac line-in?!
I just used the Blackhole.‌ It worked perfectly.
At the very high level you have to do these things:
Follow these screenshots and steps to:

Add blackhole to your OS. It's not an app you install. It's a package. Once you install it. This creates a new audio device ie adds an item named blackhole to the list of your audio inputs and outputs.
Create a Multi-output device (I did blackhole + Headphone) using your Mac's Utilities.

Then

In Garageband you set your output to that blackhole (not Multi-output)
In Skype your set your Mic input to that blackhole (not Multi-output)
Done! Begin speaking into your primary audio input source (I used my Mac's microphone)

All the steps are mentioned in detail here. Garageband is the 'sending application'. Skype is the 'receiving application'
The end result for me looked like like:
Create new project:

GarageBand Settings


I've also been told that you can achieve the same using the Loopback app.
btw, everything I mentioned in my answer is free.