Am using Lumia 535 with Denim, I really want to reset the phone because my photos app is not showing my personal folders, only Camera Roll, Saved Pictures & Screenshots are displayed.
No they won't, but they will only take space on your SD card. The Photos app will only show photos that is in Pictures folder whether in phone memory or SD card, not outside of it. If your folder of photos is in Picture folder, you may want to check photos+camera in Settings app, choose all photos then hit shuffle, worth a try before hard resetting your phone.