Fiat SpA will seek to expand a credit line to as much as 1.5 billion euros ($2.14 billion) after raising its stake in Chrysler Group LLC, three people familiar with the matter said.

Fiat will start negotiations with banks after completing the purchase of an additional 16 percent of Chrysler for $1.27 billion, said the people, who declined to be named because the talks are private, reported Bloomberg.

The loan will replace a 1 billion-euro revolving credit line that expires in February 2012. On the new facility, Fiat plans to work with Credit Agricole SA, Intesa Sanpaolo SpA and UniCredit SpA, which arranged the existing loan, and may also bring in other lenders, two of the people said.

The Italian carmaker aims to complete the deal by July, though a transaction could take longer depending on market conditions, one person said.

A spokesman for Fiat, based in Turin, Italy, declined to comment on the company’s financing plan.

After gaining earlier today, Fiat fell as much as 8 cents, or 1.2 percent, to 6.80 euros and was down 0.5 percent as of 2:36 p.m. in Milan, valuing the company at 8.4 billion euros.

Fiat, which had 13.1 billion euros of liquidity at the end of March, has been bolstering its finances in preparation of taking a majority stake in Chrysler. The Italian carmaker sold 1 billion euros of five-year bonds last month, in its first public transaction since 2009. Fiat is rated Ba1 by Moody’s Investors Service, the highest non-investment grade.

Fiat Chief Executive Officer Sergio Marchionne is set to gain control of the American carmaker two years faster than planned. He aims to increase Fiat’s stake to 46 percent in the second quarter after completing transactions to repay Chrysler’s $7.5 billion of U.S. and Canadian government loans.

Marchionne, 58, who is also the CEO of Chrysler, aims to boost Fiat’s stake to 51 percent by the end of 2011 as he prepares the Auburn Hills, Michigan-based company for an initial public offering. Marchionne is pushing Chrysler to post its first net income this year since emerging from bankruptcy.

Chrysler increased a planned bond offering, making it the biggest high-yield offering in two years after lenders balked at the automaker’s proposed loan. The bond may price as soon as tomorrow.

The Obama administration tapped Marchionne, who now runs both automakers, to revive Chrysler after it emerged from bankruptcy in 2009. In exchange for sharing technology, management and reaching operating milestones, the U.S. and Canadian governments are granting Fiat 35 percent of Chrysler without paying any cash. The original deal was for Fiat to buy the final 16 percent stake in 2013.

Fiat received an additional 5 percent in Chrysler from the U.S. government last month, giving it a 30 percent holding, by reaching targets that included opening Fiat’s dealerships in Brazil to the American automaker’s vehicles.