A loopback interface is often used as a termination address for some routing protocols, because it never goes down. Another common use of a loopback address is to identify a router. For example, say you want to find out whether a particular router is up.

Why do we use loopback interfaces on a router?

A loopback interface has many uses. Loopback interface's IP Address determines a router's OSPF Router ID. A loopback interface is always up and allows Border Gateway Protocol (BGP) neighborship between two routers to stay up even if one of the outbound physical interface connected between the routers is down.

What is a loopback interface used for?

The loopback interface is used to identify the device. While any interface address can be used to determine if the device is online, the loopback address is the preferred method. Whereas interfaces might be removed or addresses changed based on network topology changes, the loopback address never changes.