The economy is not great, and you may have a relative or close friend who could use a financial boost. Lending money to someone can be very tricky. It rarely ends well, unless the money is paid back in full in a timely manner. That typically does not happen, because if the person had the money in the first place, he would not have to borrow it from you. If you are inclined to be a do-gooder and lend someone money, here are some things to consider.
You may call it a “loan”, but only lend money that you do not need back. If you are really serious about getting it back, put it in writing with a schedule of payments. I had a relative who lent her boss/“best friend” her life savings, and she did not put it in writing. It has become obvious she will never see it again.
Waive all temptations of judging the person out loud or in your head of his spending habits going forward. I had a friend who lent his relative money, and was not happy when she made a large purchase before paying him back. He realized he needed to let it go, and that he should not say anything in order to avoid a conflict.
Before you hand over a dime, make sure anyone else who you share a household with is in agreement with the loan. Talk about your expectations of getting the money back, and the possibility of it not getting paid back. If you are not in agreement, then think twice about the loan. It could cause a lot of conflict in your household and relationship.
Lastly, give the loan with a smile, and decide that no matter what the outcome of the pay back, it will not affect your relationship with the person/people you lend the money to. If the only thing you get back is a verbal thank you, then be happy living with that.