UPDATE 1-Britain prepared to part-fund GM Europe takeover

* Mandelson says will put up cash if terms are right

* Says funds could come in loans or loan guarantees

(Adds Mandelson quotes, detail, background)

LUTON, England, July 3 (Reuters) - Britain is prepared to help underwrite the planned takeover of the European arm of General Motors GMGMQ.PK, possibly in the form of loans, Business Secretary Peter Mandelson said on Friday.

Speaking at GM unit Vauxhall's plant in Luton, north of London, Mandelson told reporters he would take part in the Europe-wide rescue plan provided the terms were right.

"I'm not going to discuss the detail of any financial underwriting, but it may involve loans or loan guarantees," he said. "We would obviously have to have interest paid and some security (for the loans). This is taxpayers' money we are dealing with and a lot of it," he said.

GM Europe trades under the Vauxhall brand in Britain. It assembles vans at Luton and cars at Ellesmere Port, in northwest England. [ID:nLA378786]

The company, which also includes German carmaker Opel, is currently in talks to be taken over by Canadian auto parts maker Magna (MGa.TO: Quote, Profile, Research). [ID:nL2541989]

Any takeover is expected to be helped by an estimated 3 billion euros ($4.2 billion) in European state guarantees. (Reporting by Avril Ormsby, Writing by John Bowker) ($1 = 0.7133 euro)