Take a look at the advantages and disadvantages of pawning

Do you need money and plan to pawn something? Don't rush to conclusions; weigh the pros and cons.

Take a look at the advantages and disadvantages of pawning
Pros and cons of taking an item to a pawn shop. Photo by Nathan Dumlao / Unsplash

2023 has arrived and after the Christmas holidays, many people ended up with a financial hangover and, what is worse, being forced to look for a loan to face debts and the January slope. Before pawning, if this is your case and you think that pawning is your only solution, before doing so, consider the following aspects.

Did you know that for Mexicans, pawning a garment is one of the three main sources of financing to face their debts at the beginning of the year? Pawning is a very popular practice in Mexico, resorted to by many families who cannot access any formal credit from a financial institution, either due to a lack of credit history or because they do not meet the requirements requested.

That is why they often resort to pawnshops, which are private institutions or establishments that grant a loan with interest in exchange for a good or pledged as collateral. This activity is known as "collateralized loans. Here are some of their advantages and disadvantages.

Advantages of pawning

It is a way to obtain financing quickly and without many requirements.

There is a range of goods that can be pawned: jewelry, appliances, cameras, video games, even tools, and more.

You have the option to get your pawned items back.

Some pawnshops give you a contract, providing a guarantee to their customers.

Disadvantages of pawning

Sometimes, these loans include additional costs.

If you do not meet the payment deadlines, you could lose your property.

It can generate more debt.

There are many fraudulent pawnshops.

Be careful! You must take into consideration the following points:

Make sure it is a legal place

The first step before going to a pawnshop is to verify if it is in the Public Registry of Pawnshops (RPCE) on the website of the Federal Consumer Protection Agency (Profeco): https://rpce.profeco.gob.mx, which provides legal security to consumers by having a single record of pawnshops that comply with the law, since in Mexico there are a large number of illegal establishments.

The key is to shop around

When people are in a desperate situation, they are susceptible to forgetting basic things like comparing the best conditions in the pawn market and taking the first house they find. Researching before pawning is always important because this way you can get the lowest interest rate (lower cost) and the highest percentage of the appraisal (more liquidity for your clothes), as well as know how many contract renewals you are entitled to and what is the term to recover your goods.

Consider the Annual Percentage Rate (CAT)

Just like any other loan offered by banking institutions, the collateralized loan has a Total Annual Cost (CAT), which, in other words, is the indicator that includes all the costs associated with the loan, such as the interest rate, commissions, storage expenses, appraisal, or insurance against theft, among others. That is why you should consider it before signing, otherwise, you will end up paying more than what you borrowed.

Review the contract before signing

It is very important that your adhesion contract is registered with Profeco and that you read and understand all the terms, conditions, and costs. Likewise, you should keep the pawn ticket, which has the information for you to make your payments at the established times, in addition to it serving you to demand the amount of compensation in case your garment has been sold.


To recover your goods, you must pay the total amount established in the contract; we recommend that you pay two or three days before the expiration date and in case you need more time, request an extension or renewal if the contract allows it. In case you are told that your pledge has already been sold, consider it a violation of the contract, since they cannot sell before the pawn term expires, if you have any disagreement due to non-compliance, file a complaint with Profeco.

Avoid falling into fraud

Did you know that there are over 9,000 pawnshops in Mexico? This is according to INEGI. However, there are also a large number of them that are not fair to their customers or do not adhere to legal requirements. So, before giving your items to a fraudulent pawnshop, identify them with the following elements:

They promise you very high amounts for your items under warranty. After figuring out how much something is worth, appraisers usually only give up to half of the real price.

They do not explain to you the rights you have when pawning. What would happen, for example, if you were unable to meet the payment deadlines and your pledge was sold; in such cases, you are entitled to a surplus, i.e., compensation if it was sold at a higher price than the one you borrowed?

All information related to the service they provide must be visible or available in brochures and/or on the internet. Among other information, their hours and days of service, the garments they accept, the procedure to pawn an item, CAT, the loan limit, storage fees, etc.

Finally, in the valuation process, make sure that the weighing scale has a recent calibration hologram. This way you will know the real weight and you will not get less money for your garment.