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Families and even friends are engaging more in formal loans between each other than ever before, especially in the UK where the practice was all but unknown a year ago.
Often it is parents providing loans to their children at a modest interest rate but many "rich" people are becoming more amenable to loaning money to their less well off friends and relatives to help out in these hard times.
This trend is the result of the recent banking crash and the banks subsequently decreasing savings interest rates while dramatically increasing loan interest rates as they try to claw bank the money they lost through their own bad investment strategies.
In one family the father loaned their son £5,000 ($8,500) at 6% over 2 years. The father's reasoning was that he simply couldn't get a better return on his money from the banks without taking significantly more risk. Likewise the son benefited because the best interest rate they could get was 17%; many with "poor" or no credit in the UK are currently being offered loans with up to 28% APR.
Obviously there is a risk involved in loaning money and one shouldn't do it unless one trusts the person one is loaning it to will be able to make the payments, but many people today are finding it a mutually beneficial way of dealing with these economic hard times.
You should also consider that a formal loan will lock in money for a set period of time; it is a long term investment. Loans of less that £2000 can however be made over shorter periods for much better interest that can be achieved in the bank while still offering the person borrowing the money a much better deal than they would get from any lending agency.
You should always formalise the loan agreement in writing, this cements trust and understanding rather than suggests a lack of trust.
These are hard times economically. The banks have failed us and while we cannot do without them entirely these days we can do more to help our own.
(This has nothing to do with the organisation calling itself the church of scientology except to say no one should loan any money to any one for them to spend on organisation's courses).