CONCORD, N.H. — Gov. John Lynch on Friday vetoed a bill that would allow New Hampshire consumers to obtain short-term, installment loans.

The bill also eliminates a 36 percent interest cap on the loans in effect since 2009.

Lynch said Friday the loans force families unable to repay them to seek welfare.

“These new installment loans are essentially payday loans that would create an escalating spiral of debt for New Hampshire families that would undermine their financial security, as well as the financial well-being of our communities and our economy,” Lynch said.

He said a lender could charge an interest of $15.50 per $100 installment that could result in interest rates effectively being in excess of 400 percent over the life of the loan. Lenders could charge consumers $1,100 to repay a $500 loan over six months, he said.

Republican House Speaker William O’Brien criticized Lynch for closing off a free market choice for consumers.

“The governor once again incorrectly assumes New Hampshire citizens aren’t mature enough to make their own financial decisions,” he said.

Jamie Fulmer, vice president of public affairs for Advance America, which writes payday loans around the country, urged lawmakers to override the veto. He said the state’s cap on interest rates cost New Hampshire jobs when the industry closed offices in the state. He said the interest cap forced consumers to seek loans from expensive, unregulated and predatory sources.

“New Hampshire consumers deserve better. They should be free to make their own decisions,” he said.

Earlier this month, lawmakers overrode Lynch’s veto on a similar bill and allowed title loan lenders to charge 25 percent per month in interest. Vehicles are used as collateral in those loans.