OSPF and Loopback Interfaces
Configuring loopback interfaces when using the OSPF routing protocol is important, and Cisco suggests using them whenever you configure OSPF on a router.
Loopback interfaces are logical interfaces, which are virtual, software-only interfaces; they are not real router interfaces. Using loopback interfaces with your OSPF configuration ensures that an interface is always active for OSPF processes.
They can be used for diagnostic purposes as well as OSPF configuration. The reason you want to configure a loopback interface on a router is because if you don’t, the highest active IP address on a router at the time of bootup will become that router’s RID. The RID is used to advertise the routes as well as elect the DR and ...