Look at the situation with the objectivity of a bank, combined with the sympathy you feel for a friend. If your heart and head agree you probably are not making a mistake helping him. If one of them tells you "No!" there is probably something wrong.
2. Consult with someone else
If a friend asks you for money, ask a third person and rely on his or hers objectivity, a person that can be another friend or a family member with a trusted intelligence.
3. Don't be afraid to say no
Never hesitate to refuse someone if the situation involves too many risks. Search for other helping options for that person. Conduct the conversation in such a manner that your friend will understand you are refusing the request not the person that made it.
4. Lending equals giving a gift?
You can suggest to that person that, if his of hers financial situation improves in the future, you will be glad to get a present that would equal the money you lent to them.
5. For your safety, sign a contract.
When you are about to give away significant amounts of money, sign, each of you, a contract that settles the conditions and the return date of the money, and also their total amount.
