UPDATE 4-CIT reaches tentative $3 bln deal with bondholders

* CIT reached $3 bln financing deal with bondholders

* CIT hopes to avoid bankruptcy with deal

* Bondholder group includes Pimco

* Deal is part of a larger restructuring plan-source (Adds details on financing)

By Paritosh Bansal

NEW YORK, July 19 (Reuters) - CIT Group Inc CIT.N has reached a tentative deal with a bondholder group for $3 billion in rescue financing, which the lender hopes will help it avoid bankruptcy, a source close to the situation said on Sunday.

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, the sources said.

CIT's board plans to meet later on Sunday to discuss the terms of the deal, and the lender is expected to announce the deal on Monday if the board approves it, according to the source, who declined to be identified because talks are private.

The deal is part of a larger restructuring plan, the source said.

CIT Chief Executive Jeffrey 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, the source said.

Curt Ritter, the company's spokesman, declined to comment.

CIT lends to nearly one million small and mid-sized businesses. Its 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.

CIT has been in talks with the bondholder group to hammer out the rescue financing deal, Reuters reported on Saturday, citing a source close to the situation.

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.

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.

On Friday, shares of the company closed up about 71 percent at 70 cents on the New York Stock Exchange. (Additional reporting by Jennifer Ablan, Michael Erman and Ransdell Pierson; Additional reporting by Jennifer Ablan; Editing Bernard Orr)