βοΈ Blended Rate Calculator
One true average rate across all your loans.
Balance-weighted average interest rate
Estimates for planning only, not financial advice.
The blended rate is the balance-weighted average of all your interest rates: one number describing what the whole debt stack costs. With $200,000 at 6.5 percent and $50,000 at 9 percent, the blended rate is 7.00 percent, not the 7.75 percent a naive average gives. The difference matters because every refinancing decision, every pay-extra-versus-invest comparison, and every "what does my debt cost" conversation should start from the weighted truth, not the unweighted mistake.
How to Use This Calculator
Enter up to four loans with their balances and rates. The calculator weights each rate by its balance, shows the blended rate, total debt, total annual interest, and each loan's share of the interest bill. Leave unused rows at zero.
Enter each loan's current balance and interest rate. Use APR instead of note rate if fees were significant.
Read the blended rate and the interest share rows: the loan contributing the most interest is your payoff priority.
Use the blended rate as your refinance hurdle and your extra-payment benchmark. For payoff ordering, attack the highest rate first; see our debt payoff planner.
The Formula
The numerator is the total annual interest bill; dividing by total balance expresses it as a rate. For our example: ($200,000 x 6.5% + $50,000 x 9%) = $13,000 + $4,500 = $17,500 of annual interest on $250,000 of debt, which is 7.00%. Note the second loan is only 20 percent of the balance but contributes 26 percent of the interest: rate matters more than its size suggests, which is why the avalanche method targets it first.
Worked Example: $200,000 at 6.5% + $50,000 at 9%
Loan 1: $200,000 at 6.5% = $13,000/year interest. Loan 2: $50,000 at 9% = $4,500/year. Total: $17,500 on $250,000 = 7.00% blended. Simple average of the rates: 7.75%, overstating the cost by 0.75 points because it gives the small loan equal weight.
Decision use: a refinance offer at 6.50% with $4,000 in fees. Improvement: 0.50 points on $250,000 = $1,250/year saved. Payback: $4,000 / $1,250 = 3.2 years. Worth doing if you keep the loans past 3.2 years; not worth it if you will sell or refinance again sooner. The blended rate made the comparison a single subtraction instead of a spreadsheet.
Common Blends
| Mix | Blended result | Note |
|---|---|---|
| $400k at 6.5% + $50k at 9.5% (80-10-10) | 6.83% | On the $450k borrowed |
| $30k student loans: $20k at 5%, $10k at 7% | 5.67% | Pay the 7% slice first |
| $15k cards at 24% + $200k mortgage at 6.5% | 7.72% | Blend hides the card emergency |
The last row is the cautionary tale: blending a 24 percent card with a 6.5 percent mortgage produces a respectable 7.22 percent that describes neither debt's urgency. Blends summarize; they do not prioritize. Always look at the individual rates before deciding what to attack.
Beyond the Average
Once you know the blended rate, three refinements sharpen it. Convert fees to APR before blending so the average reflects true cost. Adjust for tax deductibility (mortgage interest for itemizers) with our after-tax cost of debt calculator for the real economic rate. And split variable-rate debt out: a blended rate that mixes fixed and floating hides the rate risk, so show the floating share separately.
For businesses, the blended rate feeds WACC as the pre-tax debt cost; for households, it is the hurdle for extra payments versus investing. Either way, recompute it whenever a balance changes materially: payoffs and refinances move the weights, and a stale blended rate is a stale hurdle. Our loan amortization calculator tracks each loan's balance over time so the blend stays current.
Blended Rates in Business Finance
Companies live on blended rates. A firm with a 5 percent term loan, a 7 percent revolver balance, and 9 percent equipment financing has a blended debt cost that feeds directly into WACC, the hurdle rate for every investment decision. When the CFO refinances the revolver down 2 points, the blended rate moves less than the headline suggests, because the revolver is only one slice: the blend keeps the celebration honest.
Tranches complicate the picture the same way they do for households. Acquisition debt often layers a cheap term loan under expensive mezzanine financing; the blended rate looks reasonable while the mezzanine slice demands aggressive deleveraging. Smart treasurers track the marginal rate alongside the blended one: the blend describes the past, but the marginal rate prices the next decision. Refinance the highest-rate tranche first and the blend follows.
Recompute the blend whenever the mix changes: every extra principal payment, payoff, or refinance shifts the weights. A stale blended rate is a stale hurdle, and decisions made on last year's mix misprice this year's tradeoffs. Most borrowers should revisit the number annually or after any payoff; most treasurers track it monthly. The calculation takes a minute, and the decisions it informs are worth far more.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is a blended interest rate?
The balance-weighted average of multiple interest rates: sum of (each balance x its rate) divided by total balance. A $200,000 loan at 6.5% plus a $50,000 loan at 9% blends to 7.00%. It is the single rate that produces the same total interest as the mix.
What is the blended rate formula?
Blended rate = Ξ£(balance Γ rate) / Ξ£(balance). For $200k at 6.5% and $50k at 9%: ($200,000 Γ 6.5 + $50,000 Γ 9) / $250,000 = ($1,300,000 + $450,000) / $250,000 = 7.00%. Weight by balance, not by loan count: the bigger loan pulls harder.
Why not just average the rates?
Because a simple average ignores size. Averaging 6.5% and 9% gives 7.75%, which overstates the cost: most of the money sits at 6.5%. The blended 7.00% reflects where the dollars actually are. Simple averages of rates are one of the most common errors in debt analysis.
When is a blended rate useful?
Whenever debt comes in pieces: a first and second mortgage, multiple student loans, an 80-10-10 piggyback, or a company's debt stack. It answers "what does my debt cost on average," which is the input to refinancing decisions, WACC, and the rent-vs-invest hurdle.
How does a blended rate help refinancing decisions?
It sets the hurdle: a refinance must beat the blended rate after fees to make sense. If your blended rate is 7.00% and a lender offers 6.50% with $4,000 in fees, the 0.50-point improvement on $250,000 saves $1,250 a year, paying back fees in about 3.2 years. Our <a href="/finance/refinance-break-even">refinance break-even calculator</a> does the full payback math.
Does the blended rate include fees?
Not automatically. For a true cost, convert each loan's fees into its APR first with our <a href="/finance/apr-calculator">APR calculator</a>, then blend the APRs. A 6.5% loan with heavy origination fees might be 6.9% APR, which changes the blend meaningfully.
Blended rate vs WACC: what is the difference?
Blended rate averages only debt by balance. WACC goes further: it weights debt (after tax) and equity by market value to get the company's total cost of capital. The blended rate is the debt leg's input to WACC. For personal decisions, the blended rate is usually the whole answer; for corporate finance, it is step one.
How do piggyback loans blend?
An 80-10-10 has 80% at the first-mortgage rate and 10% at a higher second rate (plus 10% down, no debt). With $400k at 6.5% first and $50k at 9.5% second on a $500k price: ($400,000 Γ 6.5 + $50,000 Γ 9.5) / $450,000 = 6.83% blended on the borrowed amount. Compare that to one loan with PMI to pick the cheaper structure.
Should I pay the highest-rate or lowest-balance loan first?
Highest rate first (avalanche) minimizes total interest, always. The blended rate tells you the average cost, but payoff order should follow marginal rates: every dollar kills the highest-rate dollar first. The only exception is behavioral: killing a tiny balance first (snowball) can motivate, at a known interest cost.
Can a blended rate be misleading?
Yes, when loans have very different terms: blending a 30-year 6.5% mortgage with a 5-year 9% auto loan gives a tidy number that describes neither obligation's timeline. It is also blind to fees, variable-rate risk, and tax deductibility. Use it as a summary statistic, then decide on the individual loans.