1. What is Average Lending Rate?

The average lending rate is a weighted mean of interest rates across multiple loans, where each loan's rate is weighted by its amount. This metric helps financial institutions understand their overall loan portfolio yield.

2. How Does the Calculator Work?

The calculator uses the weighted average formula:

Where:

• Loan Rates — Array of individual loan interest rates (as percentages)
• Loan Amounts — Array of corresponding loan principal amounts
• Total Loans — Sum of all loan amounts

Explanation: The calculation gives more weight to loans with larger amounts, providing a true picture of the portfolio's overall interest yield.

3. Importance of Average Rate Calculation

Details: Financial institutions use this metric to assess portfolio performance, set competitive rates, and make strategic lending decisions. It's more meaningful than a simple average when loan sizes vary significantly.

4. Using the Calculator

Tips: Enter interest rates as percentages (e.g., 5.5 for 5.5%) separated by commas. Enter corresponding loan amounts in dollars, also comma-separated. Both lists must have the same number of values.

5. Frequently Asked Questions (FAQ)

Q1: Why use weighted average instead of simple average?
A: Weighted average accounts for loan size differences, giving more importance to larger loans that have greater financial impact.

Q2: How should I format the input?
A: Enter numbers separated by commas (no dollar signs or percent signs). For example: "5.5, 6.2, 4.8" for rates and "10000, 15000, 20000" for amounts.

Q3: What if I have different numbers of rates and amounts?
A: The calculator requires matching counts. Each rate must correspond to an amount in the same position.

Q4: Can I include zero or negative amounts?
A: No, all loan amounts must be positive values. Zero or negative amounts would distort the calculation.

Q5: How precise is the calculation?
A: The calculator shows results rounded to 2 decimal places, but uses full precision for internal calculations.