If you must go into debt, here's what to consider

Americans struggling to make ends meet in the coronavirus crisis may have to do something many would rather avoid -- take on more debt.

While often discouraged by financial planners, more debt might be a necessity given the depths of economic hardship wrought by the pandemic. Already some 22 million Americans are seeking unemployment benefits. Others are bracing for layoffs, furloughs and other financial setbacks.

Those forced to take on more debt should consider options, and try to map out a strategy, planning specialists said.

"I never say 'never' because all of us are doing the very best we can," said Megan McCoy, director of the financial planning master's program at Kansas State University. "There are ways to do this responsibly."

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Step 1: Cut Your Budget to Necessities

Taking on debt or opening a new credit card should never be your first option, said Nick Holeman, senior financial planner at robo-adviser Betterment. Instead, think about the other things you could cut -- he calls this creating "an order of operations."

"We need to create an order of operations, so ask: 'Can you put food on the table?' That should be the first and foremost priority," he said.

Stopping contributions to your retirement and education accounts, such as 401(k)s or 529 accounts, is another option before taking on debt. If the goal is to have more cash on hand temporarily, try to first suspend your mortgage payments as well as your student-loan payments. Keep in mind, though, that student loans and mortgages likely have lower interest rates than credit cards and personal loans.

Think of all measures as short term, not long term, said Mr. Holeman. "We want to make sure they're viewing this as a short-term gap, something for the next few months only."

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Step 2: Talk to Someone

You may not have a personal financial adviser, but many organizations and resources are offering consultations free of charge, Prof. McCoy said.

She suggested taking advantage of some free guidance before diving into what could potentially be a dangerous debt hole. Groups offering information include the National Association of Personal Financial Advisors and the Association for Financial Counseling and Planning Education.

"Going to talk to a financial counselor or planner could be beneficial because there may be -- and I want to emphasize 'may,' because there's still so little clarity as to what money is being made available to people -- resources coming through the different relief acts to help them avoid getting into more debt," Prof. McCoy said. "Not only stimulus checks but also small-business things and rent and student-loan freezes, foreclosure freezes, eviction freezes. Tons of things coming around that a financial planner or counselor could help you find."

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Step 3: Look at Your Loan Options

Another option: Reach out to a family member or friend for a potentially zero- or low-interest loan, said Preston D. Cherry, founder and president of Concurrent Financial Planning. Negotiating those terms with someone trusted could be easier than going to the bank, he said.

Be wary of payday lending and cash-advance loans; many have high interest rates and prey upon those with poor credit. Some can carry interest rates of 300% or higher.

"Getting a loan should not be easy," Prof. McCoy said. "If it is too easy to get, it's probably a bad sign."

She recommends relying on a credit card first, ideally one you already have open. If you have to open a new card, comparison shop. Opening a travel-rewards card with flashy points might not be the best option, she said. Instead, a cash-back card or something with a sensible points program could make more sense.

Above all, pay attention to the annual percentage rate, or APR, and make sure you understand when an introductory offer begins or ends. Some credit-card rates are increasing to provide for points programs, so keep an eye on the average rate and pay attention to how it increases for different cards. For those with good credit, the average APR at the end of 2019 hovered around 20%, according to WalletHub.

"Almost all debt is going to cause compounding interest, which means you end up paying so much more than you need to," Prof. McCoy said. "But I think that in today's world, it is relatively hard to live without any forms of debt. In fact, having a credit card and managing it correctly is actually key to have a good credit score."

If you need a bigger loan for a specific reason, Prof. McCoy recommends exploring personal loan options via your local credit union.

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Step 4: Make a Plan -- for Repayment and for the Future

Never go into debt without first thinking of how and when you'll get out of it.

"Credit cards don't buy things. They buy time," Prof. Cherry said. "That's what credit cards and debt centrally do -- buy time."

Prof. Cherry recommends calculating that time in advance of taking on any new debt. Look at the calendar and make a plan for how long you will rely on any debt and how long you will need to pay it off.

When it comes to plotting out a repayment timeline, make sure you plan further ahead than instinct tells you, Prof. McCoy said. "When it comes to money, it's much better to plan for the worst-case scenario and hope for the best, rather than doing magical thinking that says 'everything will be fine,'" she added.