The formulas
- Weighted rate = sum of (balance x rate) / sum of balances
- Yearly interest = sum of balance x rate
How it works
A plain average of rates treats a small card balance the same as a large term loan. Weighting by balance gives the rate you actually pay across all debt, which is the number to beat when you consider a consolidation loan or refinancing.
The result uses simple annual interest on current balances. It does not include fees or compounding. Compare it with the APR of any new loan, and remember that a longer term on a consolidation loan raises total interest even at a lower rate.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
Should I include a 0% promotional balance?
Yes, at 0%, but note when the promotion ends.
Is this the same as the cost of debt in WACC?
Close. WACC uses the market rate on new debt, after tax.
How do I use it for a refinance?
A new loan helps only if its APR, including fees, is below this rate over the period you will hold it.
Formulas on this page are the standard definitions.
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.