What is a Blended Rate?

A blended rate is the weighted average interest rate of two or more loans or investments combined into a single rate. It’s commonly used in financial scenarios where multiple interest rates need to be consolidated, such as when refinancing a mortgage or combining different loans. The blended rate takes into account the principal amount and interest rate of each loan, providing an effective overall interest rate for the combined total.

How to Use the Blended Rate Calculator: Step-by-Step Guide

Step 1: Enter Loan Details

Begin by inputting the details of your first loan. In the “Loan 1 Amount” field, enter the principal amount of the first loan in dollars. Then, in the “Loan 1 Interest Rate” field, input the annual interest rate as a percentage.

Step 2: Input Second Loan Information

Next, enter the details for your second loan. In the “Loan 2 Amount” field, type in the principal amount of the second loan. Follow this by entering the annual interest rate for the second loan in the “Loan 2 Interest Rate” field.

Step 3: Calculate the Blended Rate

After entering all the required information, click the “Calculate Blended Rate” button. The calculator will process your inputs and display the results.

Step 4: Review the Results

The calculator will show you the blended rate as a percentage, representing the effective interest rate for the combined loans. It will also display the total loan amount, which is the sum of both loan principals.

Step 5: Understand the Calculation

Read the explanation provided below the results to understand how the blended rate was calculated. This helps you grasp the concept of weighted averages in interest rate calculations.

By following these steps, you can effectively use the Blended Rate Calculator to determine the combined interest rate for multiple loans. This tool is invaluable for financial planning, helping you make informed decisions about loan consolidation, refinancing, or comparing different loan offers.