3 Easy Steps for Calculating a Weighted Interest Rate

weighted interest rate calculator

Ok, therefore you took out some student loans and currently you’re two-faced with paying them back. You perceive that consolidation could also be AN choice; however, you’re attempting to work out; yet, the rate is determined. If the word of “weighted average interest rate” has left you scratching your head, we will facilitate.

To clarify, solely the Direct Consolidation Loan program utilizes a weighted average rate. This program goes past the center, and only federally issued student loans are eligible.

What does “weighted interest rate calculator” even mean?

Your highest outstanding federal loan balance can have the most significant impact on what your consolidation rate is. The larger the loan, the additional ‘weight’ it’ll wear the rate calculation. So, the price on your most significant loan balance has the first influence on your consolidation rate. It should push your consolidation rate higher or lower.

After your weighted average rate is decided, the ultimate step is to pull together to the closest one/8th of 1 p.c (.125). That’s however the Direct Consolidation Loan program works.

Ok, how do I calculate the weighted interest rate calculator?

You can realize the weighted average rate in 3 easy steps.

Multiply every of your loan balances by their rate. This may offer you the per loan ‘weight issue.’
Add all the per loan ‘weight issues’ along to urge the overall weighted factor.
The last step is to divide the overall (of all the burden factors) by the overall of all the loan balances, then spherical to the closest one/8th of 1 p.c.
Here’s however that may look if you mapped it out. As an example you’ve got three loans:

Multiply the balances by the interest rate:

$4,500 x 5.31% = $238.95

$10,500 x 5.84% = $613.20

$6,000 x 4.66% = $279.60

Add the burden factors together:

$238.95

$613.20

+279.60

$1,131.75

Now, take the overall of the overall of the weighted factors, and divide that by the overall quantity of your remaining balances:

$1,131.75 divided by $21,000 equals 5.3893%

Round this to the closest one/8th of 1 p.c to urge 5.5%.

If you favor trying to this online, you’ll use this easy nonetheless fashionable consolidation calculator from Mapping Your Future. What’s nice regarding this tool is it conjointly provides AN amortization (full payment) schedule showing you the breakdown of interest vs. principal that gets applied to each payment you’d create.

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