What method of debt repayment involves making periodic payments until the balance reaches zero?

The method of debt repayment that involves making periodic payments until the balance reaches zero is amortization. This process consists of structured payments made at regular intervals, typically comprising both principal and interest components.

As the borrower makes these payments, the outstanding balance shrinks over time until, after a predefined period, the entire debt is paid off. Amortization is commonly used in mortgages and auto loans, ensuring that borrowers systematically pay off their debt while also managing interest costs effectively.

The context of other methods can further clarify why amortization is the appropriate choice. For instance, reduction might informally refer to decreasing a debt, but it doesn’t encompass the systematic, structured approach characteristic of amortization. Capitalization typically refers to accounting practices related to recognizing cost as an asset rather than as an expense, which doesn't reflect a debt repayment strategy. Liquidation involves the sale of assets to pay off debts, rather than a scheduled payment method to eliminate a balance over time. Thus, amortization stands out as the most accurate and relevant method for this question.