You can do a google search on verses in the Bible that address lending. The scriptures address charging interest on loans, being a blessing to others who are in need, etc.
Specifically, in Proverbs 22:26, the Bible talks about not giving up pledges as security for debts or co-signing. Why all of the verses and warnings when it comes to lending to others?
If you have savings and a friend or a family member comes to you with a financial need, of course, the first reaction is you want to help. Unfortunately, most of the time, it is not a good idea. Here is the one guideline to consider if you're going to loan money:
Loan it with no expectations of ever getting it back (Luke 6:35)
I know that sounds drastic. However, the vast majority of loans don't get paid back. Thus, there is a low probability that you will see that money again. As a result, that can cause a severe strain and destroy a relationship. So, if you are going to loan money and you are fine risking that relationship, then lend them money with expectations. Now, no one goes into a loan arrangement thinking the worst-case scenario. Having said that, loans can and often destroy relationships for a lifetime. From a Christian standpoint, you want to do things that build relationships, not destroy them. If you loan them money with no expectations, then you don't put that relationship in danger. Admittedly, that is a hard thing to do.
Why is there such a low probability of repayment?
Personal loans are the lender of last
If a bank or high-interest credit card won't loan them money, they are saying we don't want to lose money, and there is too much risk. Thus, as a last resort, you borrow money from a friend or family member. If the loan sharks won't touch it, why should you?
Upfront, there are always good intentions
Both parties are full of positive expectations that the money will be repaid. No one comes to borrow money, displaying a desperate attitude. Unfortunately, sometimes that positive attitude is based on the low probability of a lot of things going right.
Bad Habits that created the financial problem are still bad habits
Often, the bad habits that led to the economic issues have not gone away. Thus, how would you expect them to turn things around when they are practicing the same patterns that created the mess in the first place?
I have come across scenarios where loans have been made and paid back, and it was a good deal for everyone involved. Sometimes, someone who is responsible needs a break, and you might be in the position to provide that opportunity. Unfortunately, that is the minority of the time. A relationship with a friend or family member is not worth throwing away over a loan. Be wise in your decision to lend. Lend with no expectations.