Declaring variables inside or outside of a loop

Question

Why does the following work fine?

String str;
while (condition) {
    str = calculateStr();
    .....
}

But this one is said to be dangerou

Answer 1

As many people have pointed out,

String str;
while(condition){
    str = calculateStr();
    .....
}

is NOT better than this:

while(condition){
    String str = calculateStr();
    .....
}

So don't declare variables outside their scopes if you are not reusing it...