Blended Rate Calculator

What Is a Blended Rate?

A blended rate (also called a blended interest rate) is the weighted average of the interest rates of two or more loans, debts, or mortgages combined into a single effective rate. It lets you compare a portfolio of liabilities against a competing single-loan offer and simplifies monthly interest projections.

For example, if you hold a $100,000 mortgage at 2.5% and a $20,000 top-up at 4%, the blended rate is not simply (2.5% + 4%) / 2 = 3.25%. The correct answer weights each rate by its outstanding balance, giving you roughly 2.79%.

Blended Rate Formula

The formula is a straightforward weighted average:

Blended Rate = Sum of (Balance_i x Rate_i) / Sum of all Balances

In mathematical notation, if you have n loans each with balance B_i and annual rate r_i:

Blended Rate = [B1*r1 + B2*r2 + ... + Bn*rn] / [B1 + B2 + ... + Bn]

The result is the single interest rate that, applied to the total balance, produces the same annual interest cost as the individual loans combined.

Step-by-Step Example

Suppose you have three debts:

Loan A: $2,000 at 2% monthly
Loan B: $3,000 at 4% monthly
Loan C: $200 at 3% monthly

Step 1 - Calculate the weighted interest for each loan:

Loan A interest: $2,000 x 0.02 = $40
Loan B interest: $3,000 x 0.04 = $120
Loan C interest: $200 x 0.03 = $6

Step 2 - Sum the weighted interests: $40 + $120 + $6 = $166

Step 3 - Sum the balances: $2,000 + $3,000 + $200 = $5,200

Step 4 - Divide: $166 / $5,200 = 3.192%

When to Use a Blended Rate

Mortgage refinancing: Compare a blend of your existing first and second mortgage against a new single mortgage rate.
Debt consolidation: Check whether a consolidation loan at a stated rate actually beats your current blended rate.
Portfolio analysis: Get a quick picture of your average borrowing cost across credit cards, student loans, and personal loans.
Business financing: Combine multiple working-capital facilities and term loans into one comparable figure for financial reporting.

Blended Rate vs. Average Rate

A simple arithmetic average ignores the size of each loan, so it can be misleading. A blended rate properly weights each loan by its outstanding balance. Always use the blended (weighted average) approach when loan balances differ significantly.

Limitations

The blended rate assumes all loans share the same compounding period. If your loans compound daily, monthly, or annually at different intervals, you should convert each to an equivalent annual effective rate before blending. Also note that this calculator does not account for fees, origination charges, or points that affect the true cost of borrowing (APR).

Frequently Asked Questions

What is a blended interest rate?

A blended interest rate is the weighted average interest rate of two or more loans combined. Each loan's rate is weighted by its outstanding balance, giving a single rate that represents the average cost of borrowing across all loans.

How do I calculate a blended mortgage rate?

Multiply each mortgage balance by its interest rate, sum those products, then divide by the total balance. For example, a $200,000 loan at 3% and a $50,000 loan at 5% gives a blended rate of (200,000 x 0.03 + 50,000 x 0.05) / 250,000 = 3.4%.

Is a blended rate the same as an APR?

No. A blended rate is a weighted average of stated interest rates. APR (Annual Percentage Rate) also includes fees, points, and other financing costs. The blended rate is useful for comparing the raw interest cost, while APR gives a more complete cost picture.

How many loans can I blend together?

Mathematically, you can blend any number of loans. Our calculator supports up to as many rows as you need. Simply click "Add Loan" to include additional debts.

Why is my blended rate lower than expected?

The blended rate is pulled toward the rate of your largest loan. If most of your debt is at a low rate, the blended rate will be close to that low rate, even if a smaller loan carries a much higher rate. This is why debt consolidation is most impactful when you have large high-rate balances.

Can the blended rate be used for investments?

Yes. The same formula applies to a portfolio of bonds or savings accounts with different yields. Multiply each investment's value by its yield, sum the results, and divide by the total portfolio value to get the blended portfolio yield.

What does the "Weight" column in the results table mean?

The weight shows what percentage of your total debt is attributable to each individual loan. A higher weight means that loan has more influence on the blended rate. For example, a loan that represents 80% of your total balance contributes 80% of the influence on the final blended rate.

Report