Blended Rate Calculator

- May 11, 2025
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Calculate the combined (blended) interest rate when consolidating multiple loans or credit lines. This helps determine if refinancing or debt consolidation is beneficial.

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About Blended Interest Rates

A blended interest rate is the weighted average interest rate of multiple loans or credit lines. When considering debt consolidation or refinancing, understanding your blended rate helps determine if a new loan offer is truly beneficial.

When to Use a Blended Rate
  • Debt Consolidation: When combining multiple loans into a single new loan
  • Mortgage Refinancing: When combining a primary mortgage with a home equity loan
  • Student Loan Consolidation: When merging multiple student loans with different rates
  • Business Loan Analysis: When analysing the effective cost of multiple business financing sources
Benefits of Knowing Your Blended Rate
  • Accurately compare consolidation offers against your current situation
  • Understand the true cost of your existing debt
  • Make informed decisions about which debts to pay off first
  • Evaluate if a debt consolidation loan actually saves you money
Example

If you have a mortgage with a £200,000 balance at 4% interest and a car loan with a £20,000 balance at 6% interest, your blended rate would be:

Blended Rate = (£200,000 × 4% + £20,000 × 6%) ÷ £220,000 = 4.18%

This means that if you're offered a consolidation loan at 4.1%, it would be beneficial, but if offered at 4.3%, you would actually pay more interest overall.

What is the Blended Rate Calculator?

The Blended Rate Calculator is a handy tool designed to help you combine multiple loans or credit lines into a single interest rate. This can be especially useful if you're thinking about refinancing or consolidating your debts. By entering details like your loan balances and interest rates, you can quickly figure out what your overall rate would be. This helps you see if it makes sense to combine your loans into one payment.

How Does It Work?

Using the calculator is straightforward. You simply input your loans, starting with the name, balance, and interest rate for each one. The tool automatically calculates the blended interest rate based on the weighted averages of your inputted data. This means it takes into account how much each loan contributes to your overall Financial picture. You'll also get a summary of your total balance, yearly interest, and how many loans you have combined.

Why You Might Need It

  • Debt Consolidation: If you want to simplify your finances by merging multiple loans.
  • Mortgage Refinancing: To see how your primary mortgage combines with a home equity loan.
  • Student Loans: When looking to merge various student loans into one payment.
  • Business Loans: To evaluate the cost of different business financing options.

Understanding the Results

After entering your loan information, the calculator provides several results. You'll see the blended interest rate, which is the average rate across all your loans weighted by their balances. Additionally, it shows your total loan balance and yearly interest that you would pay at this blended rate. This information can help you make better financial decisions regarding your loans.

Visual Breakdown of Your Loans

The calculator also offers visual tools to help you understand your loans better. It includes charts that break down your loan balances and interest rates. This visualisation enables you to see how different loans impact your overall financial situation, making it easier to compare and analyse options.

Calculating Steps Explained

For those interested in how the blended rate is calculated, the tool provides a section detailing the steps involved. The blended rate is derived from the formula that takes the sum of each loan's balance multiplied by its interest rate, divided by the total balance of all loans. This shows how each loan’s weight affects the overall rate.

Benefits of Knowing Your Blended Rate

  • Compare debt consolidation offers accurately against your current loans.
  • Understand the real cost of your current debts.
  • Make informed choices about which debts to pay off first.
  • Evaluate if a new loan offer would save you money.

Practical Example of Blended Rates

Imagine you have a mortgage of $200,000 at 4% and a car loan of $20,000 at 6%. Using the blended rate formula, you would find your rate is approximately 4.18%. Knowing this helps you evaluate new loan offers effectively. If a consolidation loan is offered at 4.1%, it might be worth considering, but at 4.3%, it may not be beneficial.