Blended Interest Rate Calculator
Calculate the single weighted-average (blended) interest rate that represents multiple loans or deposits with different balances and rates.
How to use this tool
- Enter loan 1 balance, loan 1 interest rate, loan 2 balance, loan 2 interest rate, loan 3 balance (optional) and loan 3 interest rate in the fields above.
- Results update instantly as you type โ or click Calculate.
- Read your blended interest rate and the full breakdown beneath it.
โ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation โ verify with a qualified professional.
Formula
Blended Rate = ฮฃ(Balancei ร Ratei) / ฮฃ(Balancei)
This is a weighted arithmetic mean where each loan's weight equals its share of the total outstanding balance.
How it works
The blended (weighted-average) interest rate aggregates multiple loans into a single equivalent rate by weighting each loan's rate by its outstanding principal balance. It is widely used when consolidating debt or comparing a bundle of loans against a refinancing offer.
This calculator supports up to three loans; if the third loan balance is left at zero it is excluded. Rates must be annual; the total annual interest shown assumes simple interest and no compounding within the year.
Worked example
$100,000 at 4% and $200,000 at 6%
- Annual interest on Loan 1: $100,000 ร 4% = $4,000
- Annual interest on Loan 2: $200,000 ร 6% = $12,000
- Total balance = $300,000; total annual interest = $16,000
- Blended rate = $16,000 / $300,000 = 5.3333%
Blended interest rate = 5.3333%
Common mistakes to avoid
- Weighting by the number of loans rather than by loan balances โ a $10,000 loan at 3% and a $100,000 loan at 7% do not simply average to 5%.
- Mixing fixed-rate and variable-rate loans in a blended rate and then treating the result as if it is fixed, ignoring future rate changes on variable components.
- Using stated APR rather than effective APR (which includes fees) when comparing blended rates across lenders.
Key terms
- Blended rate
- A single interest rate that represents the weighted average of two or more loans with different balances and rates.
- Weighted average
- An average in which each value is multiplied by a weight (here, loan balance) before summing, then divided by the sum of weights.
- Debt consolidation
- Combining multiple debts into one new loan, often at the blended rate or lower, to simplify repayment.
Frequently asked questions
- When is a blended interest rate useful?
- When you have multiple loans (mortgage + HELOC + car loan, for example) and want a single number representing your overall cost of debt for budgeting or comparison purposes.
- Does a lower blended rate always mean I should consolidate my loans?
- Not necessarily. Check the new loan's fees, term length, and whether consolidation resets a repayment clock. A slightly lower blended rate spread over a longer term can cost more in total interest.
- How do I calculate the blended rate for a mortgage with points?
- Add the upfront points (as a cost) to total interest paid over the expected holding period, then calculate an effective annual rate on that total against the loan balance.