I personally believe that if you are lending a sum of money to a friend or family member that you should have a formal contract for repayment. Many people feel that because it's someone close to them that there is no way the person wouldn't pay them back, unfortunately that is not the case.
I think that you shouldn't lend an amount of money to someone, without a contract, unless you are OK with never getting that amount back. This sum differs for everyone.
If you worry about repayment, treat it as a business transaction and make up a simple formal contract. People tend to treat money differently when paper and ink come into the agreement.