First, be honest with your vet about what you can afford. That way instead of trying this or that, the vet can get right down to it, even if its more drastic.
It sounds like its low enough on the tail that it shouldnt affect her spine if its treated.
Untreated, the tissue can cause gang grene and basically that will slowly kill off healthy tissue and organs.
Can you send a picture of the area? you can find me on facebook if you need to.