UPDATE 1-GMAC's bonds tumble after plan to exchange debt

(Updates with credit default swaps)

NEW YORK Oct 31 (Reuters) - Bonds of ailing auto finance and mortgage provider GMAC LLC fell as much as 6 points on Friday after the company said it would offer to exchange much of its debt, a deal that could leave bondholders with an investment loss.

GMAC's 7.75 percent notes due in 2010 fell to 75 cents on the dollar, down from 81 cents on Thursday, according to MarketAxess. Its 8 percent bonds due in 2031 fell to 46 cents on the dollar, down from 49.5 cents on Thursday.

The cost of protecting GMAC's debt with credit default swaps rose to 45 percent upfront, or $4.5 million to protect $10 million of debt, from as low as 35 percent upfront on Thursday, according to data from Phoenix Partners Group. The credit default swaps also require annual premiums of $500,000 a year.

Credit default swaps on Ford Motor Co's (F.N) finance arm Ford Motor Credit rose to 42 percent upfront from 39 percent at Thursday's close, plus $500,000 a year.

GMAC said on Thursday it would offer to exchange debt "for a reduced principal amount of new indebtedness." After the announcement, Moody's Investors Service downgraded GMAC deeper into junk territory and said it may cut the rating again because the exchange offer would create greater risk of loss for unsecured creditors. (Reporting by Dena Aubin; Editing by James Dalgleish)