So I have a family member who has asked for a loan. We have a good relationship. He has done a lot for me in the past. I do not want to make this loan. I think it will put significant strain on our relationship. I do not want to be sitting there at a family BBQ in awkward silence as we are both trying to make small talk and not talk about him owing me money.

I can afford to make this loan but it will mean canceling our vacation the fall. Whats more He knows I can afford to make the loan.

Any thought ? Should I suck it up and make the loan? How Can I tell him “no”?

Any loans made to friends and family are always made as gifts. This way if you never get the money back its no strain. If you do, consider it a blessing. Only give money if you can afford to do so.

Champion's got it right. We have been through this many times and it does cause hard feelings when they don't repay. So now, if the need is worthwhile and we can handle it, we consider it a donation.

I am wondering a couple of things. would this loan fix a problem or prolong the inevitable? will he be hitting others up to take care of things and I will be just be one in a line to be repaid?

I realize whenever you lend money to family it is NOT a business decision - you could very well never get it back

13 questions to ask and answer before you loan anyone money
http://www.gettoknowu.com/LifeLessons/LifeLessons_Loan_Money_to_a_Friend.php

With all due respect Moab, Its not up to you to determine the outcome of their decision, but only can you afford to make the money gift. I.E. You can pick who you want you daughter to marry, but you can't pick who she will fall in love with.

Been there .... here's how it happened for us:

Relative asked for quite a bit of money as a loan.
We said that the sum in question HAD to be a LOAN because it was too much to be a gift. As a potential lender, we said we'd consider it, but wanted first to do what any lender would do - and that was get a full picture of their debts, income etc. They told us and we were able to determine that they needed something different than a loan - they needed a good bankruptcy attorney, to hand back the fancy car, etc. We recommended financial experts, etc ---- and we gave them a very small loan - one we hope to get back but one we will not feel terrible if we don't.
No hard feelings on either side .......

if you decline to loan a friend money you may loose a friend.
if you loan a friend money and they don't repay, you loose a friend and the money.

I hate to say this but I have been in the position of having to ask a relative for money. They could easily afford the loan but it was much harder for me to repay the loan. I did finally repay the loan but the whole time I had the debt I felt very uncomfortable and so did the person who loaned me the money. Everyone is in an difficult position; don't loan the money, give it as a gift or not at all.

..why don't they just go get a bank loan?

they may not have the proper credit to do so