I would evaluate it on the following points, in order of importance:
0) Is the amount something you are comfortable losing?
1) Are their any personal issues (substance abuse, gambling, etc.)?
2) Are they throwing good money after bad?
3) Do you trust the person?
4) How close is the relationship?
5) Is this an anomaly or a consistent pattern of financial mismanagement?
6) What are the consequences of them not receiving the loan?
7) What is their specific plan for repayment, is it realistic, & what contigencies may hamper thier efforts?
If you do go forward, discuss the need for them to communicate openly if the loan can’t be repaid on schedule, and that it is OK if, and only if, it’s due to circumstances beyond their control (and completely unacceptable if they are putting discretionary spending before repayment).
Finally, if the sum is significant, ask for collateral. Have them sign over their vehicle(s) & draft a loan contract. If they take offense, remind them that it is only an issue if they don’t pay you back. If they still refuse, don’t lend the money.
In my opinion, friends/relatives who are *truly* in need deserve some help. If they respect you and have the means, your money will be repaid. If they lack the means, but are trying in earnest, consider the loan a gift until things turn around. If they have the means and don’t repay you, then you’ve just discovered the depth of your relationship.
