Collateral has two functions: 1. Incentivize the borrower to continue paying so as to not lose the collateral. 2. Allow the lender to recover some of the valu

Collateral has two functions: 1. Incentivize the borrower to continue paying so as to not lose the collateral. 2. Allow the lender to recover some of the value of the loan. A locked phone serves the first purpose because the lender can disable its primary function.