Blended Rate

A blended rate is an interest rate that is calculated by taking the average of two or more different interest rates. This type of rate is often used when comparing loans from different lenders, as it allows you to see the overall cost of borrowing money.

There are a few different ways to calculate a blended rate. One common method is to simply add the interest rates together and divide by the number of rates. For example, if you are comparing two loans with interest rates of 5% and 6%, the blended rate would be 5.5%.

Another method is to use the weighted average of the interest rates. This method takes into account the size of each loan, so that the interest rate of the larger loan has a greater impact on the blended rate. For example, if you are comparing two loans with interest rates of 5% and 6%, but the first loan is for $10,000 and the second loan is for $5,000, the weighted average interest rate would be 5.6%.

The blended rate is a useful tool for comparing loans, but it is important to remember that it is only an estimate of the true cost of borrowing money. The actual interest rate you will pay may be higher or lower, depending on the terms of the loan.

In addition to the interest rate, there are other factors to consider when comparing loans, such as the fees and closing costs. It is important to read the fine print of any loan agreement before you sign it, so that you understand all of the costs involved.

By understanding the blended rate and other factors, you can make an informed decision about which loan is right for you.