UPDATE 6-CIT clinches deal to stave off bankruptcy -source

* CIT board OKs $3 bln financing deal with bondholders-source

* CIT hopes to avoid bankruptcy with deal

* Bondholder group includes Pimco

* Deal is part of a larger restructuring plan (Adds details on board approval)

By Paritosh Bansal

NEW YORK, July 19 (Reuters) - CIT Group Inc's CIT.N board signed off on a deal late on Sunday to receive $3 billion in rescue financing from a group of bondholders, in a plan the lender hopes will allow it to avoid bankruptcy, a source close to the situation said.

The company, which lends to nearly one million small and mid-sized businesses, is expected to announce the deal before markets open Monday, according to the source, who did not want to be identified because the talks are private.

The bondholder group, which includes Pacific Investment Management Company (Pimco) and some other top CIT holders, is expected to provide the financing with a 2 1/2-year term, two sources said.

The $3 billion rescue financing plan will be backed by remaining unsecuritized assets which likely exceed $10 billion, the second source familiar with the matter said. The second source also did not want to be identified because the talks are private.

"The $3 billion is new money but securitized by all the remaining unsecuritized assets which probably exceed $10 billion," that source said.

Curt Ritter, the company's spokesman, declined to comment when the initial details of the deal were reported.

CIT's problems surfaced two years ago in the wake of Chief Executive Jeffrey Peek's decision earlier in the decade to expand into subprime mortgages and student loans, both potentially highly profitable but fraught with added risk.

Peek, who was initially surprised when the lender did not get government help, led the company's efforts to get the funds from private sources, one of the sources said.

CIT has about $40 billion of long-term debt, according to independent research firm CreditSights.

About $1.1 billion of debt will come due in August, followed by about $2.5 billion by the end of the year.

CIT gained the status of bank holding company in December so it could draw $2.33 billion of taxpayer money from the Treasury's Troubled Asset Relief Program. But last-ditch rescue talks with the U.S. government failed last week as the Obama administration declined help, saying it had set high standards for granting aid to companies and leaving private investors as the one alternative to avoid collapse.