Your question is a classic theme in epistemology, which is the topic about the circularity in reasoning also known as epistemic circularity (IEP):
An epistemically circular argument defends the reliability of a source of belief by relying on premises that are themselves based on the source. It is a widely shared intuition that there is something wrong with epistemically circular arguments.
Thus, many people reject that God is real because the Bible says so, because when asked how a person of faith knows the Bible is true, the adherent to the Bible merely claims that God or the Holy Spirit reveals to them. We say such a person believes in epistemic revelation. In regards to logic, how do we know logic is good and true falls to the philosophy of logic. The intuition is that circularity in definition or justification is suspect, but there are many contexts that make it clear that SOME circularity is not only acceptable, but desirable. Propositions often contain impredicativity. In terms of epistemic circularity, it persists in too many thinkers' mind not to offer some pragmatic benefit. Ultimately, the question may revolve around belief revision. If one starts off believing the Bible, and then builds a world view that affirms the Bible, then one has a consistent worldview. Psychologically, such a philosophy would reduce cognitive dissonance. A persons material logic supports belief in the Bible, and the Bible supports belief in the person's material logic. One's formal logic will even grow to conform to one's beliefs.
My question is two-fold. Can circular reasoning be logical, like in the case of logic itself? If so, could it be applied to the Bible?
So, yes, logical systems and informal logic can indeed be circular and defensible if one finds other ways to ground meaning and truth, such as appeals to faith or embodied cognition as a basis for imbuing logic structure. And yes, it absolutely can and is applied to the Bible by theologians regularly. In fact, atheists who use logic to deny the supernatural and theologians who affirm it both, in a way, are invoking a certain degree of circularity in their epistemic arguments simply because words don't have meaning independent of experience. Each side merely appeals to their experience as a foundation for justifying the degree of circularity in their own worldview.
If your question is 'Should they'? Then you are now entering the territory of wrestling with Agrippa's tropes:
Dissent – The uncertainty demonstrated by the differences of opinions among philosophers and people in general.
Progress ad infinitum – All proof rests on matters themselves in need of proof, and so on to infinity, i.e, the regress argument.
Relation – All things are changed as their relations become changed, or, as we look upon them from different points of view.
Assumption – The truth asserted is based on an unsupported assumption.
Circularity – The truth asserted involves a circularity of proofs. [emphasis mine]
In real human beings, there is a tendency to create worldviews that exhibit arguments from a mixture of these tropes. Just how and when one should do each seems to be just as much a question of psychology as logic proper, and the decisions about how and when is a question of axiology. A metaphilosopher recognizes that the plurality of philosophical positions is itself worthy of study, and that modern science seems to suggest that there are biological factors in our beliefs such as the biology of political views. Thus, if you're looking for a one-right answer to your question, you might be dismayed to find that there isn't a canonical response. Many highly intelligent thinkers diverge on such specific questions.