I’d just replace it - but generally if you can wd40/oil it and then just work the mechanism back and forth until it’s looser and then refit into the door.

Now that it's taken apart, does the knob and spindle rotate without issues? If yes, then the latch is your problem. Next, see if the latch moves freely. If it doesn't, clean and re-lube. If both parts work good while taken apart, then the assembly on the door was the problem, i.e. mounted too tight/at an angle etc.