2 min read
Definition
The weighted average interest rate combines the rates on all your facilities, each weighted by its outstanding balance, into a single number. A £80,000 loan at 8% and a £20,000 loan at 18% give a weighted average of 10%, not 13%, because the larger balance dominates. It is the honest headline cost of a mixed debt stack.
In plain terms
It stops one small, pricey debt or one big, cheap one distorting the picture — it shows what your borrowing actually costs on average.
Why it matters for your company
Track your weighted average rate over time; consolidating a high-rate debt into a lower-rate facility pulls it down. See consolidating business debt to cut interest.
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