Blended Rate Calculator
Calculate the weighted average interest rate (blended rate) for multiple loans, investments, or debt consolidation scenarios. Useful for understanding the overall cost of borrowing or return on investment.
Blended Rate Summary
Blended Interest Rate:
0.00%
Total Loan Amount:
$0.00
Weighted Average Rate:
0.00%
Number of Loans:
0
Loan Breakdown
Rate Analysis
Highest Rate:
0.00%
Lowest Rate:
0.00%
Rate Range:
0.00%
Understanding Blended Interest Rates
A blended interest rate, also known as a weighted average interest rate, is the average interest rate of multiple loans or investments when combined. This calculation is essential for understanding the true cost of borrowing when consolidating debt or analyzing investment portfolios.
How Blended Rates Work
Weighted Average Formula
- Blended Rate = S (Amount × Rate) / Total Amount
- Each loan weighted by its balance
- Larger loans have more influence
- Simple mathematical average of rates
Practical Applications
- Debt consolidation analysis
- Investment portfolio returns
- Mortgage refinancing decisions
- Business loan combinations
Rate Interpretation
- Overall borrowing cost
- Effective interest rate
- Comparison tool for lenders
- Decision-making metric
Limitations
- Doesn't account for term differences
- Ignores payment schedules
- Assumes same compounding
- May oversimplify complex loans
Blended Rate Examples
| Loan | Amount | Rate | Weighted Contribution |
|---|---|---|---|
| Credit Card 1 | $5,000 | 22.99% | 11.50% |
| Credit Card 2 | $3,000 | 19.99% | 6.00% |
| Personal Loan | $7,000 | 12.99% | 9.09% |
| Total | $15,000 | Blended Rate | 26.59% |
When to Use Blended Rates
Common Applications
Debt Consolidation
- Compare consolidation loan rates
- Determine if consolidation saves money
- Calculate new payment requirements
- Assess long-term savings
Investment Analysis
- Portfolio overall return
- Asset allocation effectiveness
- Performance benchmarking
- Risk-adjusted returns
Business Financing
- Multiple loan combinations
- Line of credit utilization
- Capital structure optimization
- Cost of capital calculations
Mortgage Analysis
- Refinancing decisions
- Rate comparison across lenders
- Loan combination scenarios
- Break-even analysis
Blended Rate vs Simple Average
Simple Average:
- All rates weighted equally
- (Rate1 + Rate2 + Rate3) / 3
- Doesn't reflect loan sizes
- Can be misleading
Blended (Weighted) Average:
- Rates weighted by loan amounts
- More accurate representation
- Reflects true cost of borrowing
- Better for decision making
Key Takeaways for Blended Rates
- Blended rates provide a more accurate picture of overall borrowing costs than simple averages
- Larger loans have more influence on the blended rate than smaller loans
- Use blended rates when comparing debt consolidation options or investment returns
- Remember that blended rates don't account for differences in loan terms or payment schedules
- Blended rates are essential for understanding the true cost of multiple debts
- Always consider the time value of money when analyzing blended rates
- Blended rates help in making informed decisions about refinancing or consolidation
- Regularly recalculate blended rates as loan balances change over time