Really Simple – When a friend in needs asks for a sum for money on loan, you can politely refuse saying – “I wish I could, but as a rule, I don’t lend money to friends.”
It works because you are not singling out this person as untrustworthy. Never lend money to friends and you won’t get a reputation as a walking, breathing ATM.
Why You Shouldn’t Feel Guilty: Lending any amount of money can cause problems. It can change the nature of your relationship if the person doesn’t pay you back. Link.