How this calculator works
A blended rate is the weighted average of the rates on several debts, weighted by the amount owed on each. It answers the question: if all of this debt carried one rate, what rate would produce the same interest? Large balances pull the average towards their own rate, so a small card balance at a very high rate moves the blend less than its rate suggests. The blended rate is useful for judging a consolidation offer: if the new loan charges less than the blend, the interest side of the deal improves before fees and term are considered. Interest is calculated simply on each balance; no compounding within the year is assumed.
Formula
Blended rate = sum(balance_i × rate_i) / sum(balance_i). Annual interest = sum(balance_i × rate_i). Monthly interest = annual interest / 12. Enter each rate as a percentage, so 6.5 means 6.5% and is used as 0.065 in the calculation.
Worked example
$20,000 at 6.5%, $15,000 at 8.25% and $5,000 at 19.99% give annual interest of $1,300.00, $1,237.50 and $999.50. The total is $3,537.00 on $40,000, which is a blended rate of 8.84%, even though two of the three rates are below that. The high-rate balance is large enough to lift the average.
Frequently asked questions
Why is the blended rate higher than most of my rates?
Because the highest rate may sit on a substantial balance. In the example, 19.99% on $5,000 contributes almost as much interest as 6.5% on $20,000.
Is the blended rate the rate a consolidation loan must beat?
It is the interest comparison, yes. But a consolidation loan also changes the term and may add fees, so compare total cost as well as the rate.
Can I enter rates as decimals instead?
No. This list field expects percentages, so enter 6.5 rather than 0.065. A decimal entered as 0.065 would be read as 0.065%, which is almost zero.
Does this account for compounding?
No. It is a simple weighted average of nominal rates. If the accounts compound differently, the true annual cost of each differs slightly from its nominal rate.