Your best friend calls you and says "I hate to say it but I am totally broke and can't even buy groceries, can you lend me some money?"
You decide you ought to lend the money – but the question becomes getting it back.
If you are lending the money without any expectation of repayment – sort of a dignified way of making a gift – then things are legally easy. Just give over the money with a smile, say "pay me back when you can" and forget about it. If you get repaid that's a bonus but it isn't something to be expected. Just remember that giving charity this way will rebound to your credit in the next life and so it's "money well spent".
But if you are lending the money and expect to get it back – and that's totally reasonable – then certain legal points do come up.
First, do you expect to be paid interest? If so you have to make sure your friend knows what the interest is and how it will be calculated. This doesn't have to be anything fancy. You can say "I will lend you $500 for a year and you will pay me back $550." The rate of interest cannot exceed 60% a year so interest of 10% a month is not legal.
Second, the loan is best reflected in writing and signed by both you and your friend. Again nothing fancy is required but having the loan recorded in writing means you can prove it wasn't a gift and terms of the loan are not unclear. It is enough to to say something like this:
[your name] lent and [friend's name] borrowed $XX on [date]. [Friend's name] will repay $yy, which includes all interest, on [repayment date].
[date of signing]
Signatures of both you and your friend.
Make two copies of the paper so you have one and your friend has one. It does seem a bit formal to make written loan agreements between friends but doing so will avoid arguments later. It also means everyone is clear that it's a loan and not a gift. And if your friend doesn't want to sign the paper that's a pretty good hint your friend won't repay you later.
If your friend doesn't pay the loan back you can remind them verbally and then in writing, say by email. Your email does not have to be complicated but it should mentioned any earlier verbal request to pay. It could say "I am sorry to keep pestering you but I need to get the money I lent you back. I reminded you last week but you still haven't paid. Please let me have the money right away." If the reminders do not work you can go to court to try to get a judgment for repayment. You have to do so within six years of the repayment being due – if there is no date for repayment the two years (probably) starts when you make the loan. Small Claims Court will deal with loans up to $25,000 and you do not need a lawyer to help you in that court (although you are certainly allowed to have a lawyer if you want). Having the loan documented on paper, a copy of the email reminder and having other proof you made the loan (maybe a copy of the cheque to your friend or a slip from a bank machine showing you withdrew the money) is very helpful.
Making a loan to help a friend is a very good thing. It usually doesn't lead to any problems but having everything in writing makes it easier to get repaid if things do go wrong.