Do You Believe in Usury?|
It might seem gauche, but I always charge interest on any loan over a modest size, even to friends. This is because I've found that even if the loan is nominally interest-free, as long as it goes unpaid, it extracts an implicit cost in guilt, social tension, and/or feelings of obligation, and I don't think that there's anything either person can say to truly eliminate that cost. Charging interest makes it a business arrangement, where everything is neat and above-board.
nodnod. I think a big part of that implicit emotional cost is a recognition of the opportunity cost imposed on the lender.