Should I loan money to friends or family?

Anyone who has ever loaned money to a friend or family member is likely going to tell you to never do it. No matter how you go about doing it, a loan between friends or family always seems to end badly.

Consider my personal experience with this issue: Friends were desperate for money and I contemplated whether or not I could help. We had discussed money issues in the past, and had agreed that as long as financial transactions were treated "as business" and as long as all parties were honest, money wouldn't come between a friendship.

I loaned my friends the money they needed with a loan agreement laying out the payment terms. When the time came to pay, they didn't pay. We discussed new payment terms, and a new loan agreement was drawn up to reflect the new terms. And again they didn't pay.