When it comes to friends, there are two types of lending. One is true lending - helping out with a down payment or large purchase or repair. The other is incidental lending - loaning money for a friend to buy lunch if they forget their wallet. In either case, a repeat borrower should be avoided.

In the true lending scenario, you should ALWAYS get an IOU (which is, in fact, a promissory note). If your friend is offended that you ask for this, this is your first red flag. You can find basic forms on the internet. If it's a large amount, it may be worth calling an attorney friend, if you have one. I am currently representing a client who loaned his friend of 20 years about $70K - the friendship is over and they are in Court.

On the other hand, I've never had a problem spotting a friend for a drink or food when we go out. Usually it works out in the end, with the friend paying for something along the way. (I have also, on rare occasions, asked an employee for a $1 to buy a soda, if I didn't have cash and paid it back immediately.) A good rule of thumb is that, if you feel uncomfortable when asked, don't do it.