I know someone that is a mark for her friends and family. They ask to borrow money often. She complies, but then complains about it. She doesn't want to do it, but she thinks it's a compassionate, charitable act.
I say, don't do it if you don't want to and if you do want to ask these questions:
1) How will you use the money?
2) How and when will you repay this loan?
3) Where else have you looked for this money? Who have you asked? Why did they decline?
4) Don't you have the money? Why?
5) Perhaps there are ways for you to get the money on your own. Have you considered a yard sale? Maybe you have items in your closet that you don't use any more. If they are luxury items, you can sell them online for a larger return.
The answers will reveal what chance there is of the money being repaid. Also, it will reveal if they have used the money on frivolities. In which case, they don't deserve the money.
Here are some ways to say no:
“Sorry, I don't have any money to spare. My money is accounted for even before I earn it.”
“You mean you don't have any money? That's a bummer as I was going to ask to borrow from you. Why don't we just call it even?”
“Sorry, it’s my policy to be neither a borrower nor a lender.”
“Unless it's a matter of life or death, please don't ask.”
“If I give you the money, then I'll be without it and you know what it's like to be without money. I know you don't want to put me in that situation. So I will not put you in that situation.”
“Sorry, I can't help you.” If they ask why, say, "Why does the reason matter? Would your knowing help you in any way? Also, I don't feel comfortable discussing my personal finances."
Buy time: "I can't answer now. I need to talk to my wife/accountant...” or “I need to check on my accounts”. Hopefully, they will move on and not ask again.
If you do decide to lend money, be prepared to never see it again.
If someone asks for a second loan after you've extended one before, you can respond that you will consider it once they have paid the original debt.
Finally, I must say I do not think it is a charitable act to bail people out of bad situations they have created for them selves. By saying 'no' you teach them to act right, or suffer the consequences. You are doing them a favor by saying 'no'. You are helping them grow up.
