1. What is the Blended Rate?

The blended rate is a weighted average interest rate that combines multiple loans with different rates into a single effective rate. It's commonly used when consolidating loans or analyzing multiple financing options.

2. How Does the Calculator Work?

The calculator uses the blended rate formula:

Where:

• \( Loan1 \) — Amount of first loan in USD
• \( r1 \) — Interest rate of first loan (as decimal)
• \( Loan2 \) — Amount of second loan in USD
• \( r2 \) — Interest rate of second loan (as decimal)

Explanation: The formula calculates the dollar-weighted average of the interest rates based on the size of each loan.

3. Importance of Blended Rate Calculation

Details: The blended rate helps borrowers understand the true cost of multiple loans and compare financing options. It's essential for loan consolidation, refinancing decisions, and financial planning.

4. Using the Calculator

Tips: Enter loan amounts in USD and interest rates as decimals (e.g., 5% = 0.05). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Can I use this for more than two loans?
A: Yes, you can calculate sequentially - first blend two loans, then blend that result with a third loan, and so on.

Q2: Does this account for different loan terms?
A: No, this only calculates the interest rate blend. For different terms, you'd need a more complex calculation.

Q3: How is this different from a simple average?
A: A simple average doesn't consider loan amounts. The blended rate weights each rate by its loan amount.

Q4: Can I use this for APR calculations?
A: This works for nominal rates. For APR (which includes fees), you'd need additional calculations.

Q5: Is this useful for investment returns?
A: Yes, the same principle applies when calculating blended returns on multiple investments.