Blended Rate
Also known as: weighted average rate, combined rate
The single effective interest rate that results from combining two or more loans with different rates into one calculation. Used when refinancing or consolidating to determine whether the new loan is actually cheaper than the existing mix of debts.
Full definition
A blended rate is the weighted average of multiple interest rates, calculated by dividing total annual interest across all debts by the total outstanding principal. Formula: Blended rate = (Loan A balance x Rate A) + (Loan B balance x Rate B) + ... / (Total balances) Example: You have a $10,000 credit card at 22% APR and a $5,000 medical bill at 0% (promotional period ending). A lender offers you a $15,000 consolidation loan at 16% APR. Your current blended rate is: ($10,000 x 0.22 + $5,000 x 0.00) / $15,000 = $2,200 / $15,000 = 14.67%. The consolidation loan at 16% is actually more expensive than your blended rate, even though it is less than the credit card rate alone. You would be paying more by consolidating in this scenario. When blended rate matters: Debt consolidation decisions: compare the consolidation loan APR against the blended rate of all debts being consolidated, not just against the highest-rate debt. Refinancing: if you are refinancing one of several loans, a blended rate calculation shows the true before-and-after picture for your total debt load. Mortgage analysis: blended rate comparisons arise when homeowners evaluate first and second mortgage combinations. Limit of the concept: Blended rate only measures interest cost, not total cost. A lower blended rate that extends the repayment term dramatically can cost more in total interest over the life of the loan. Always calculate both blended rate and total interest paid before deciding to consolidate.
- Written by
- Get Advance Loan Editorial Team
- Reviewed by
- Compliance Review
- Published
- January 15, 2026
- Last reviewed
- June 15, 2026
- APR (Annual Percentage Rate)APR is the yearly cost of borrowing, expressed as a percentage of the loan amount. It includes interest plus most lender fees, so it's a more complete measure of cost than the interest rate alone.
- Interest rateThe interest rate is the percentage of the loan balance charged per year as interest, excluding fees. It is a component of, but smaller than, the APR.
- Fixed interest rateA fixed rate stays the same for the entire life of the loan, so the monthly payment never changes. Most U.S. personal loans are fixed-rate.
- Variable interest rateA variable rate can change over the life of the loan, usually tied to an index like the prime rate. Monthly payment can rise or fall.
- Prime rateThe prime rate is the benchmark interest rate U.S. banks publish for their most creditworthy commercial customers. Many consumer rates are quoted as prime + a margin.
- Loan termThe loan term is how long you have to repay the loan, usually expressed in months. Common personal-loan terms are 24, 36, 48, 60, and 72 months.
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