Yes, hell exists in Buddhism as a literal real place as real as this world we live in, but there many hellish worlds and they are temporary (though many can last for extremely long time-periods).
In reality the concept of hell might have originated in Buddhism because early Hinduism does not seem to have the concept nor does early Judaism or the majority of pre-Buddhist religions, they have only vague ideas and concepts.
Buddhism is among the only religion where hell is central concept, described in high graphic details, highlighted and emphasized all the time. Most certainly it was not added in because it is found everywhere in earliest scriptures.
This makes me wonder if NT Christian writers had copied the concept of hell from Buddhism since there were many Greco-Buddhists. The Greek concept of hell is vague and only somewhat like the NT Christian version which seems to more resemble Buddhist hell. It would be much more reasonable to argue that hell was added into NT Christianity than added into Buddhism, because the evidence shows Buddhism as the probable originator of the hell concept.
Which other recorded figure had ever described hell in such high graphic details before The Buddha?
The Buddha says:
"In the same manner bhikkhus, the unpleasantness and displeasure
experienced on account of six thousand whips three times a day
cannot be reckoned as a comparison, not even as a quarter, nor even
as a sign for the unpleasantness and displeasure experienced in hell.
The warders of hell give him the fivefold binding." (Balapandita
Sutta, MN 129)
"And then later on, with the divine eye, which is purified and
surpasses the human, I see that on the dissolution of the body, after
death, he has reappeared in a state of deprivation, in an unhappy
destination, in perdition, in hell, and is experiencing extremely
painful, racking, piercing feelings.
Suppose there were a charcoal pit deeper than a man's height full of
glowing coals without flame or smoke; and then a man scorched and
exhausted by hot weather, weary, parched and thirsty, came by a path
going in one way only and directed to that same charcoal pit.
Then a man with good sight on seeing him would say: 'This person so
behaves, so conducts himself, has taken such a path, that he will come
to this same charcoal pit'; and then later on he sees that he has
fallen into that charcoal pit and is experiencing extremely painful,
racking, piercing feelings. So too, by encompassing mind with mind...
piercing feelings." (Maha-sihanada Sutta, MN 12)
"As it creates fears instead of freeing one's mind from suffering. It
also creates a mechanism of punishment for not believing in the
religion as well."
I don't know, lots of things create fear, but the belief in hell can create positive fear and motivation to act. The Buddha states the truth not what people necessarily want to hear.
My personal belief is that hellish worlds are really physically real and that it would be proven in the future, it's only a matter of time. I already have a hunch on how it could be proven, but who wants to witness or go to hell?