You must first evaluate how you feel about a loan. Will you hover over your friend until they pay you back? Will you feel the need to give your opinion on their purchases? If these kinds of stresses are not something you want to deal with, I would not recommend loaning someone close to you money. If you think you can loan it freely, then do so. After all, we are here to help each other out and who doesn't need to be helped out occasionally.
Would you rather gift the money to them? People that don't want to worry about a loan will gift the money, not expecting any sort of payback. This is a fine way to do it if you have the money and are not enabling them. It is a fact that people are more grateful and appreciative of things they have worked hard for and sometimes, by giving people money, we allow others to not work to their full potential and stand on their own two feet. Please be very careful to evaluate whether this person borrows money often from you or from others, because if they do, you will not see your money again. And if you give it to them, are you really making their life better in the long-run?
If you do decide to loan the money, please draw up a contract (often referred to as a note). If you feel you should charge interest, please do so. That way there are no arguments down the road on the terms of the agreement. By doing so, you are helping them out and protecting yourself. A win-win situation.