A family member comes to you with their hand out.

While that scenario is hopefully a handshake nine out of 10 times, there are instances where that is a relative coming to another in need of financial assistance.

As countless Americans try to navigate their way through tough economic times, it is not uncommon to hear stories of family members loaning others money.

So, a family member comes to you and needs financial assistance, what do you do?

While loans between family members oftentimes go off without a hitch, there are cases where relationships become strained for a period of time or even permanently because one member is unable to pay the other back.

As many individuals are hit with job losses, major illnesses, divorces and more, the stress on relationships increases.

A family member may step in to help, thinking their actions will improve the situation for their loved one. What oftentimes happens, however, is that the individual who was loaned the money can’t pay it back, hence the relationship becomes strained.

According to estimated data from the Federal Reserve Board in recent years, some $53 billion in loans are exchanged yearly between family members. Among the more typical money assistance efforts are for auto loans, medical expenses, credit card payments, student loans and mortgages.

In the event you find yourself the loaner or the individual receiving the money, here are tips to make the transaction as smooth as possible:

• Be businesslike – While you may feel that informal is the way to go, keeping the transaction as professional as possible serves both parties best in the long run. While it may seem extreme, having a formal contract noting how much the loan is for; date/s of payback, etc. is the way to go, with both parties signing off on it. Not only does this enhance the chances of a smoother transaction, but it is a good learning tool for the person receiving the money when they actually have to do a similar matter with those not related to them.

• Can I afford it? – While the inclination is leaning to help a family member out, will doing so put you in a financial predicament? If the answer to that question is yes, take serious pause to such a loan. The last thing you want to do is end up in the same spot your loved one is in.

• Is the person receiving the money very responsible? – Another important question to ask is will and how are they likely to pay you back? Is the person you’re loaning working? Have they been paying their bills regularly? If there are any red flags, don’t hesitate to bring up the questions before you sign the check. Avert a disaster beforehand even if it means some ruffled feathers.

• Is the amount being loaned set or an open check? If you’re loaning money to a loved one, is the amount of the loan set or did you essentially give them a blank check? The latter can open up a can of worms, so proceed cautiously if you go down that route. While you’re goal is to help your loved one out, giving them free rule with your bank account is a no-no.

Loaning money to a family member doesn’t have to be a painful experience; it can actually be done with love.

That said be kind and yet firm so you can bank on a better experience.

Dave Thomas is a writer based in San Diego, California. He writes extensively for an online resource that provides expert advice on purchasing and outsourcing decisions for small business owners and entrepreneurs at ResourceNation.com.