What is a blended interest rate?

A blended rate is the weighted average interest rate across multiple loans. It's calculated by: (Loan1 × Rate1 + Loan2 × Rate2...) ÷ Total Loans. Example: $10,000 at 5% and $20,000 at 7% gives blended rate of (10,000×0.05 + 20,000×0.07) ÷ 30,000 = 6.33%. This helps evaluate overall debt burden.

When should I calculate my blended rate?

Calculate blended rate to: 1) Understand your effective debt cost, 2) Evaluate refinancing opportunities, 3) Compare against consolidation loan offers, 4) Assess whether to pay down debt or invest, 5) Set a baseline for evaluating new loan offers. If consolidation offers lower rate than your blended rate, it might be worthwhile.

Should I consolidate my loans?

Consolidate if: consolidation rate is meaningfully lower than blended rate (0.5%+ difference), you'll save on total interest, monthly payment becomes manageable, or you'll maintain payment discipline. Don't consolidate if: you'd extend payoff timeline significantly, fees exceed savings, or you might run up additional debt. Always calculate total interest paid under both scenarios.

How does blended rate help with debt payoff strategy?

Compare your blended rate against investment returns to decide between paying debt vs investing. If blended rate is 8% and investments return 7%, pay down debt. If blended rate is 4% and investments return 7%, consider investing. However, also consider risk tolerance and loan types (always prioritize high-interest consumer debt over low-interest mortgages).