I think the usual approach to any mythical/monster/ghost story is two-fold.
In-universe, the mythical beast can really be anything - the characters are bound by the script to believe in it (or not). The explanation to them is a part of their character and a part of the plot being portrayed to us, the audience.
Out of universe, for it to feel appropriate to the audience, though, it must contain sufficient reference or recall of 'known real-world' myths of monsters or beasts. They don't need to exist in our world, they just need to be 'already known' to the audience - be it vampire, dragon or minotaur. This enables swifter understanding of the myth as a plot point.
This way, if a beast has hints of, say, bigfoot, or a troll, or a fairy or a unicorn, the audience already has sufficient knowledge of that creature in their own cultural background as to not be confused when hearing of a version of it inside a movie plot. This can allow the plot itself to unfold with less exposition needed for the audience's sake.
Once that is established - then the movie can surprise us by not being what we'd thought.
You may notice that for any truly 'unimaginable' monster, considerably more exposition goes into the plot to keep the audience up to speed, at a pace to match the narrative timing for that exposition. If they do it well, you don't notice it happening - you have to step back to see how they did it; usually on second or third watching. I'm thinking along the lines of the first 'Alien' where we had no clue where it was going, but they spent a lot of time telling us, for that information to then turn out to be wrong, several times.