How do i calculate the average interest rate for a group of loans?
I have a group of student loans and I often want to get the average rate for the group. How do I determine this? I assume there is a simple formula I could use. My loans are, for example:
150 @ 3.2%
100 @ 7.5%
200 @ 6.3%
323 @ 4.12%
Thank you
Tags: 'interest, Average, Calculate, group, Loans, Rate, Student Loan
The simplest way to look at this is to work out how much interest you would pay on each loan in, for example, one year if no repayments were made.
£150 @ 3.2% = £4.80
£100 @ 7.5% = £7.50
£200 @ 6.3% = £12.60
£323 @ 4.12% = £13.31
Then if you added all these together the loan would be £773 and the interest would be £38.21 – and taking two numbers gives an average rate of about 4.94%.
It’s not possible to just take an average of the four rates as they apply to very differing amounts.
Add up all of your amounts: 773
Add up all of your interest: 21.12% divide by 4 = 5.28%
773 x .0528 = 40.81 interest
Average is computed by adding all the items of same classification or category and divided by number of items added. So, adding 150, 100. 200, and 323 is 773, divided by 4 is 193.25 – the average loan amount. Adding 3.2%, 7.5%, 6.3%, and 4.12% is 21.12% divided by 4 is 5.28%. 5.28% is the average interest rate applicable only to multiplied with the average loan amount of 193.25 – which may result to an amount of 10.20 as the average interest.