Having limited income of their own, Polish local authorities are compelled to make use of debt instruments in their financial management. One of the most significant dilemmas facing a local authority is the choice of an appropriate debt instrument. The aim of this paper is to identify the most important factors which should be taken into account when such decisions are taken (for example: the availability of repayable sources of finance, especially restrictions on availability resulting from limits on debt from the Act on public finances, speed with which capital is obtained, available sum of capital, required payback period, security for repayment of capital, cost and risk associated with obtaining capital, flexibility of a debt instrument, promotional effects etc.). Of course it is impossible, without analysis of an individual case, to indicate universal principles for the choice of a repayable financial instrument by a local authority. Before accepting any kind of debt, a local authority should always carry out a comprehensive economic analysis.