Ventilator :
Even if you do animation by hand you can make it loop well,
Just copy the first frame animation to the end of your sequence to make it loop well (with some touches perhaps) !

Some games like Guild Wars, use simple baked animations and it works well.
You have to manually retouch animations sequence to avoid jerks. And they use several animation of clothes with blending ;
like idle, walk , run, jump etc ... !
It's fake, but looks really good, specially if the animation use bones and if you have done some code modifying slightly the animation by orientating clothes depending on character direction and speed.