The reason you need to enter your Apple ID password lies in the iCloud Activation Lock service. You'll be asked to enter your Apple ID password to turn off Find My iPhone. You can factory reset your iPhone right on your device by going to Settings app > General > Transfer or Reset iPhone > Erase All Content and Settings. Why You Need Apple ID Password to Factory Reset an iPhone? It's the most complete and efficient way to wipe out all data and content on an iPhone. With a combination of button inputs, you can factory reset an iPhone and restore the device to its original manufacturer settings.
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