As you have surely realized 10% amounts to less income as the principal remaining on the loan is paid back reducing the lender's overall income. But, you must keep in mind that non-payment is a possibility. Notwithstanding your friend's reliability this friend may get hit by a bus. Generally, you would want to seek a lien on some piece of property for the duration of the loan. With that said, it is in your best interest by miles to recoup your principal as soon as possible; early repayment is the best possible outcome even though it means less total interest income (which is taxable in the US).
In Michigan, as in many other states, there may well be regulations that limit the interest rate, compounding nature, and allowable fees of personal loans. Some jurisdictions may only allow simple interest, meaning interest cannot be calculated against accrued interest. These anti-loan-sharking laws.
I have seen simple interest loans where the annual interest is calculated as soon as the loan is issued and annually at the loan anniversary. This way, as soon as the loan is issued, $7,700 is due. Then if your friend pays you $3,000 through the year, at the anniversary of the loan the total outstanding is $4,700 making the total amount owed by the end of year two $5,170 ($4,700 + $470). In these arrangements where interest is only calculated once at the beginning of a year, expect to only receive payment on the last day of the year as there is no incentive to pay earlier.
You could use an adjustable rate loan where you adjust the rate each year to approximate a 10% overall yield. But this is needlessly complex in my opinion.
The award limit in Michigan small claims is $6,000. All you really need between you and a friend is a signed piece of paper saying the money is owed. In the worst case scenario you take that piece of paper to small claims court and get your $6,000, unless the amount remaining at the time is below that amount, award and try to collect against it.
I really can't stress enough that as a lender, particularly when your outstanding loan risk is so specific, your primary main objective is getting your money back. You are not a bank. Your tolerance for default is zero. Getting back your original $7,000 is WAY more important than ensuring you earn $2,000 in interest rather than $1,500 (or whatever).