Blended Interest Rate Calculator

How it works

Carry several debts at different rates and no single figure tells borrowers what the money costs. A mortgage, a car loan and two credit cards each charge a rate of their own.

Those rates still add up to one summary figure, the blended interest rate, also called the weighted average annual percentage rate (APR). That single rate charges the same interest as your whole set of loans and cards does today.

The blended interest rate is not a plain average of the rates you pay. It weights each rate by how much you owe at it, because a rate only matters in proportion to its balance:

• B_k, the balance on each debt
• R_k, the APR charged on that balance
• Σ, add the result up across every debt you owe

Run the calculator defaults through. The $6,000 card at 22.9% generates $1,374 of interest a year, and the $2,500 card at 18.5% adds $462.50.

The $9,000 personal loan at 11.4% adds $1,026, and the $1,200 store card at 26.9% adds $322.80. Together that is about $3,185 a year on $18,700 of debt.

Divide one by the other and the calculator puts your blended interest rate at 17.0%, roughly $265 a month. So which number should you measure a lender's offer against?

The simple average of those four rates is 19.9%, nearly three points higher, and it describes nobody's debts. Only the blended interest rate matches what your loans cost, so judge a consolidation loan or a mortgage refinancing quote against it.

✓ Every result is checked against independent reference math. See how we test the calculators →

How to use this calculator

1. Enter your first debt, its current balance and the annual percentage rate charged on it.
2. Add a row for every other loan, card and line of credit you owe on, including second mortgages and home equity lines.
3. Use the promotional rate, not the standard one, on a card still inside a 0% window.
4. Read the blended interest rate the calculator returns, then compare it against the quote on a consolidation loan, a home equity loan or a mortgage refinancing offer.
5. Rerun it after any interest rate change, so the benchmark matches what you owe now.

A worked example: four debts, one honest rate

Say you are carrying four balances: a $6,000 card at 22.9%, a $2,500 card at 18.5%, a $9,000 personal loan at 11.4%, and a $1,200 store card at 26.9%. That is $18,700 of debt, and the calculator puts your blended rate at 17.0%, which costs about $265 a month in interest.

The number worth staring at is the one sitting next to it. The simple average of those same four rates is 19.9%, almost three points higher than the truth. The gap opens up because the personal loan is 48% of everything you owe, so its cheap 11.4% carries nearly half the weight, while the 26.9% store card is only about 6% of the balance and barely registers.

Your worst rate is the one you complain about; it is not the one you are paying.

Now clear that personal loan and set its balance to 0. Nothing else changes, yet the blend leaps to 22.3% on the $9,700 of card debt still standing, and the monthly interest drops to $180. You are unambiguously better off with less debt, but what remains is expensive, and a 19% consolidation offer that would have cost you money last month now saves it.

Enter your own balances and rates above to find the number any offer has to beat.

Why is it not the average of your rates?

Most borrowers start by averaging the four rates, which treats a $1,200 store card as the equal of a $9,000 loan. No bank works that way, because interest is charged on loan balances, not on averages.

• At $9,000 the personal loan is 48% of what you owe, so its 11.4% rate gets nearly half the say.
• The store card's 26.9% rate looks alarming, yet $1,200 is only 6% of the total, so it barely moves the blend.
• The weighted average matches the simple average only when every loan balance is the same size.

So the simple average can be off by several points in either direction, and this calculator weights each balance by size instead. When it overstates your blend, your debts cost less than they feel, so a refinancing offer has to beat a lower blended interest rate.

The number a consolidation loan has to beat

A debt consolidation loan or a balance transfer swaps your mix of debts for one interest rate. That single interest rate either beats your blend or it does not.

• Anything under 17.0% at the defaults cuts your interest bill, and a 12% loan takes the monthly payment from about $265 to roughly $187.
• A 19% loan looks cheap beside a 26.9% store card, yet it costs more than the debts you already hold.
• A home equity loan or a mortgage refinance can beat the blended interest rate, as long as you hold the term steady when comparing.

Origination fees on personal loans and transfer fees on cards belong in the calculation, since either can erase a slim saving. Our debt consolidation savings calculator prices that gap in dollars.

The break-even tool shows how many months of cheaper interest earn a refinancing fee back.

What does a blended rate mean for a mortgage?

Most people meet this calculator through their mortgage. Say a first mortgage of $220,000 sits at 4.1% and a second mortgage of $40,000 sits at 8.6%.

Neither mortgage rate alone describes what the property costs. The blended interest rate does, and it is the figure any mortgage refinancing quote has to beat.

Second mortgages carry the higher interest rate, so refinancing both liens at once is common. A cash-out refinance folds them into one loan, and you judge that new rate against the blend.

An old first mortgage at a cheap rate pulls the blend a long way down. That is how a cash-out mortgage refinance can cost you money while its headline rate looks low.

Enter each mortgage lien as its own row and the calculator runs the calculation just as it does for cards. Second mortgages, home equity loans and a home equity line of credit at a variable rate all belong in the list.

The blend ignores amortizations, so your property value and your equity stay outside the formula. That equity still matters, because your loan-to-value ratio sets how much a lender will advance.

Your credit score then decides what underwriting allows on a new loan, and a weak property value can stop a cash-out refinance before anyone discusses the rate.

Business borrowers and real estate investors run the same calculator across their property investments. Those loans sit against one building, so the blend sets the rate a return on investments has to beat. Brokers quote a blended mortgage rate too.

Before you fold card debts into a cash-out refinance, remember that tax law treats mortgage interest and card interest differently. Check the accuracy of your balances, because you repay that cash over decades of homeownership.

What moves your blended interest rate up or down?

Pay your debts down and this number behaves in a way that surprises people. Clearing a cheap loan pushes it up, even though your interest bill just fell.

Clearing an expensive loan pulls it down. Neither move is good or bad by itself, because the blend describes what is left, not how well you are doing.

• Retiring the $9,000 personal loan at 11.4% lifts the blend to 22.3% on the $9,700 of card debt left.
• Clearing the $1,200 store card barely moves the blend, though paying it off is a quick win for your credit score.
• Rerun the calculator after any interest rate change or mortgage refinancing.

The blend will not choose which debt to attack first. Run it beside our multiple debt payoff calculator for the sequence, and the debt-free date that follows.

The avalanche method still holds: pay the highest rate first, whatever that loan is worth, because it saves the most interest. The CFPB's debt help pages are the place to start if a loan has gone to collections.