1. What is Weighted Average Interest Rate?

The Weighted Average Interest Rate (WAIR) calculates the average interest rate across multiple loans, weighted by their respective loan amounts. It provides a more accurate representation of the overall interest burden than a simple average.

2. How Does the Calculator Work?

The calculator uses the WAIR formula:

Where:

• \( Loan_i \) — Individual loan amount ($)
• \( Rate_i \) — Interest rate for each loan (%)
• \( Total\ Loan \) — Sum of all loan amounts ($)

Explanation: The calculation gives more weight to larger loans, providing a true average interest rate that reflects the actual cost of borrowing.

3. Importance of WAIR Calculation

Details: Calculating WAIR is essential for financial planning, debt consolidation decisions, comparing loan options, and understanding the true cost of multiple loans or credit facilities.

4. Using the Calculator

Tips: Enter loan amounts and corresponding interest rates as comma-separated values. Ensure both lists have the same number of values and are in the same order.

5. Frequently Asked Questions (FAQ)

Q1: Why use weighted average instead of simple average?
A: Weighted average accounts for the size of each loan, giving larger loans appropriate influence on the overall rate, which simple average does not.

Q2: Can I use this for different types of loans?
A: Yes, WAIR can be calculated for any combination of loans including mortgages, car loans, personal loans, and credit cards.

Q3: How does WAIR help in debt consolidation?
A: WAIR helps determine if a consolidation loan offers a better overall rate than your current combined loans.

Q4: Should I include zero-interest loans?
A: Yes, include all loans as they contribute to the total loan amount and affect the weighted calculation.

Q5: How often should I recalculate WAIR?
A: Recalculate when you take new loans, pay off existing ones, or when interest rates change significantly.