Blended Rate Calculator — Combine Multiple Rates into One Weighted Average
The Blended Rate Calculator helps you combine two or more different rates into a single weighted average rate. This is especially useful when managing multiple loans, mortgages, credit lines, or even utility and business costs. Instead of looking at each rate separately, you can calculate your true overall cost of borrowing or blended percentage.
What Is a Blended Rate?
Definition in Simple Terms
A blended rate is the weighted average rate of several items. Each item contributes to the final rate based on its size or weight. In finance, it means finding the average interest rate of multiple loans weighted by their loan amounts.
Blended Rate vs Simple Average
A simple average just adds rates and divides by the count. This is inaccurate for loans of different sizes. A blended rate multiplies each rate by its loan size and divides by the total loan balance, giving a true reflection of cost.
Why Blended Rates Matter
They allow borrowers, businesses, and investors to make better financial decisions by knowing the real cost of capital, not just the advertised rates.
How the Blended Rate Calculator Works
Core Weighted Average Formula
The formula is straightforward:
Blended Rate = Σ (Loan Amount × Interest Rate) ÷ Σ (Total Loan Amount)
Where Σ means “sum of all.”
Step-by-Step Breakdown
- List all loans with their amounts and interest rates.
- Multiply each loan amount by its interest rate.
- Add all these results together.
- Divide by the total loan amount.
Handling Multiple Loans
Our calculator allows unlimited loan entries. Add mortgages, credit cards, personal loans, or business loans and instantly see the weighted blended rate.
Practical Applications of Blended Rates
Combining Multiple Loans or Mortgages
When refinancing, lenders often present a “blended rate.” Knowing how to calculate it lets you compare new offers accurately.
Credit Cards and Lines of Credit
If you carry balances across several cards at different rates, your blended rate tells you your true cost of debt.
Business Project Costs and Labor Rates
Companies with teams earning different hourly rates often calculate a blended labor rate for budgeting and project costing.
Energy or Utility Blended Pricing
Energy companies may blend rates across peak and off-peak usage. Businesses do the same when averaging multiple suppliers.
Insurance Premiums
Actuaries use blended rates to calculate premiums across different risk groups or coverage types.
How to Use the Calculator — Step by Step
- Click Add Another Loan to enter each loan’s amount and interest rate.
- Optionally, name each loan for easy tracking (e.g., “Mortgage” or “Credit Card”).
- Click Calculate. The blended rate will appear instantly.
- Review the portfolio summary and loan breakdown to see contributions by weight.
The tool also provides comparisons vs simple averages and highlights optimization insights for refinancing.
Manual Calculation Methods
Weighted Average Formula Example
Suppose you have:
- Loan A: $50,000 at 4%
- Loan B: $20,000 at 6%
Blended Rate = (50,000 × 4% + 20,000 × 6%) ÷ 70,000 = (2,000 + 1,200) ÷ 70,000 = 4.57%.
Common Mistakes
- Using simple averages ( (4%+6%) ÷ 2 = 5% ) → Incorrect.
- Forgetting to convert percentage to decimal in calculations.
- Leaving out one of the smaller loans, which still contributes to the total.
Why Weights Matter
The larger the loan, the more it influences the overall blended rate. A $200k mortgage at 4% has more weight than a $10k credit card at 15%.
Example Problems and Solutions
Example 1 — Blended Loan Rates
Loan A: $100,000 at 5%. Loan B: $50,000 at 7%.
Blended Rate = (100,000×0.05 + 50,000×0.07) ÷ 150,000 = 5.67%.
Example 2 — Mortgage Refinancing
Mortgage 1: $250,000 at 3.8%. Mortgage 2: $80,000 at 4.2%.
Blended Rate = 3.9% approx.
Example 3 — Business Labor Blending
Three employees earn $20/hr, $30/hr, $40/hr, working equal hours. Blended = $30/hr. But if one works twice the hours, weights change, and blended rate rises.
Example 4 — Energy Rates
1,000 kWh at $0.12, 500 kWh at $0.20 → blended = $0.147/kWh.
FAQs About Blended Rates
Is blended rate the same as weighted average?
Yes, “blended rate” is just another term for a weighted average percentage.
Can I use blended rate for credit cards?
Yes. If you carry multiple balances, your blended rate reveals the true cost of carrying that debt.
How is blended rate different from APR or IRR?
APR includes fees; IRR measures return on investments. Blended rate only averages rates by weight, without fees or compounding.
What fields use blended rates besides loans?
Blended rates are used in energy billing, insurance pricing, labor cost planning, and investment portfolio analysis.
Conclusion
Key Takeaways
- Blended rate = weighted average, not a simple average.
- It is crucial for debt consolidation, refinancing, and cost analysis.
- The larger the weight, the bigger its impact on the final rate.
When to Use Calculator vs Manual
Use manual calculation for simple two-loan examples. For portfolios with multiple loans or complex balances, the calculator saves time and avoids mistakes.
Next Steps — Explore Related Tools
- Reverse Percentage Calculator
- Stock Average Down Calculator
- Land Mortgage Calculator
- APUSH Score Calculator
These calculators expand your financial toolkit, helping you make smarter, data-driven decisions.