What a blended rate is
A blended rate is the single interest rate that, applied to your combined balance, produces the same total interest as your loans charged separately. It is a balance-weighted average of the rates on two or more debts. This calculator computes it from each loan's outstanding balance and annual percentage rate (APR), then reports the combined balance and the interest that rate implies.
The formula
The blended rate is the sum of each balance multiplied by its rate, divided by the total of all balances:
Blended rate = (B1 × R1 + B2 × R2 + …) / (B1 + B2 + …)
Because larger balances carry more weight, the blended rate always lands between your lowest and highest individual rate, closer to whichever loan holds the most principal. From it, the tool derives your combined balance, total annual interest (blended rate × combined balance), and the monthly interest that implies.
A worked example
- Mortgage: $250,000 at 3.5% → 250,000 × 0.035 = $8,750 a year
- Auto loan: $20,000 at 6.5% → 20,000 × 0.065 = $1,300 a year
- Credit card: $8,000 at 18% → 8,000 × 0.18 = $1,440 a year
Total interest is $11,490 on a combined balance of $278,000, so the blended rate is 11,490 / 278,000 = 4.13%. The small credit-card balance barely moves the average even though its rate is high, because the mortgage dominates the total principal.
When to use it
- Comparing a debt-consolidation or refinance offer against keeping several debts: if the new single rate beats your blended rate, it lowers your interest cost.
- Reporting one effective rate for a portfolio of loans or lines of credit.
- Estimating the true current cost of carrying multiple balances at once.
The blended rate assumes each APR is quoted on the same basis and weights by current balance, not by remaining term or payment schedule, so it estimates your present interest cost rather than modeling a full payoff. Verify major consolidation or refinancing decisions with a licensed professional.